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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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  1. Kennedy, Steven & Borland, Jeff, 2000. "A Wage Curve for Australia?," Oxford Economic Papers, Oxford University Press, vol. 52(4), pages 774-803, October.
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  5. Gaure, Simen & Røed, Knut, 2003. "How Tight is the Labour Market? A Micro-Based Macro Indicator," Memorandum 09/2003, Oslo University, Department of Economics.
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  10. Pissarides, Christopher A & Wadsworth, Jonathan, 1989. "Unemployment and the Inter-regional Mobility of Labour," Economic Journal, Royal Economic Society, vol. 99(397), pages 739-55, September.
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  16. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  17. Faini, Riccardo & Galli, Giampaolo & Gennari, Pietro & Rossi, Fulvio, 1997. "An empirical puzzle: Falling migration and growing unemployment differentials among Italian regions," European Economic Review, Elsevier, vol. 41(3-5), pages 571-579, April.
  18. Jari Ritsila & Marko Ovaskainen, 2001. "Migration and regional centralization of human capital," Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 317-325.
  19. Pissarides, Christopher A & McMaster, Ian, 1990. "Regional Migration, Wages and Unemployment: Empirical Evidence and Implications for Policy," Oxford Economic Papers, Oxford University Press, vol. 42(4), pages 812-31, October.
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