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Wage Formation, Regional Migration and Local Labour Market Tightness

  • Kåre Johansen

    ()

    (Department of Economics, Norwegian University of Science and Technology)

  • Fredrik Carlsen

    ()

    (Department of Economics, Norwegian University of Science and Technology)

  • Knut Røed

    ()

    (The Ragnar Frisch Centre for Economic Research, University of Oslo)

Economic theory predicts that local labour market tightness affects local wage setting as well as individuals’ migration decisions. But how should we measure local labour market tightness? In this paper we show that the common practice of using the local rate of unemployment as the tightness indicator may be misplaced. Instead, we propose a human capital adjusted outflow rate from unemployment that can be computed on the basis of micro register data. This outflow rate performs better than traditional measures of regional labour market conditions in panel data analyses of regional wages and interregional migration.

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Paper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 2903.

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Length: 27 pages
Date of creation:
Date of revision: 14 Feb 2003
Handle: RePEc:nst:samfok:2903
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