IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20040054.html
   My bibliography  Save this paper

Spatial Heterogeneity and the Wage Curve revisited

Author

Listed:
  • Simonetta Longhi

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Peter Nijkamp

    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Jacques Poot

    (University of Waikato, Hamilton, New Zealand)

Abstract

Most ‘wage curve’ studies treat local labour markets as independent ‘islands’ in the national economy. However, when a local labour market is in close proximity of other labour markets, a local shock that increases unemployment may not lead to lower pay rates if employers fear outward migration of their workers. Hence, the unemployment elasticity of pay will be greater, the more isolated the local labour market is. Wages are also expected to be higher in regions that interact strongly with other regions. These hypotheses are confirmed by means of an estimation of wage curves with data for 327 regions of western Germany over the period 1990-97.

Suggested Citation

  • Simonetta Longhi & Peter Nijkamp & Jacques Poot, 2004. "Spatial Heterogeneity and the Wage Curve revisited," Tinbergen Institute Discussion Papers 04-054/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20040054
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/04054.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Montuenga, Victor & Garcia, Inmaculada & Fernandez, Melchor, 2003. "Wage flexibility: evidence from five EU countries based on the wage curve," Economics Letters, Elsevier, vol. 78(2), pages 169-174, February.
    2. Rama, Martin & Scott, Kinnon, 1999. "Labor Earnings in One-Company Towns: Theory and Evidence from Kazakhstan," The World Bank Economic Review, World Bank, vol. 13(1), pages 185-209, January.
    3. Molho, Ian, 1992. "Local Pay Determination," Journal of Economic Surveys, Wiley Blackwell, vol. 6(2), pages 155-194.
    4. Büttner, Thiess & Fitzenberger, Bernd, 1998. "Central wage bargaining and local wage flexibility: evidence from the entire wage distribution," ZEW Discussion Papers 98-39, ZEW - Leibniz Centre for European Economic Research.
    5. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1589-1598.
    6. Morrison, Philip S. & Papps, Kerry L. & Poot, Jacques, 2006. "Wages, employment, labour turnover and the accessibility of local labour markets," Labour Economics, Elsevier, vol. 13(5), pages 639-663, October.
    7. Sato, Yasuhiro, 2000. "Search theory and the wage curve," Economics Letters, Elsevier, vol. 66(1), pages 93-98, January.
    8. Kare Johansen & Kristen Ringdal & Thortle Thøring, 2001. "Firm profitability, regional unemployment and human capital in wage determination," Applied Economics, Taylor & Francis Journals, vol. 33(1), pages 113-121.
    9. William M. Boal & Michael R. Ransom, 1997. "Monopsony in the Labor Market," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 86-112, March.
    10. Burgess, Simon & Profit, Stefan, 2001. "Externalities in the matching of workers and firms in ritain," Labour Economics, Elsevier, vol. 8(3), pages 313-333, June.
    11. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    12. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9780521171960.
    13. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 26-29, January.
    14. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-125, March.
    15. Lutz Bellmann & Uwe Blien, 2001. "Wage Curve Analyses of Establishment Data from Western Germany," ILR Review, Cornell University, ILR School, vol. 54(4), pages 851-863, July.
    16. Baltagi, Badi H. & Song, Seuck Heun & Koh, Won, 2003. "Testing panel data regression models with spatial error correlation," Journal of Econometrics, Elsevier, vol. 117(1), pages 123-150, November.
    17. Heather Boushey, 2002. "Reworking the Wage Curve: Exploring the consistency of the model across time, space and demographic group," Review of Political Economy, Taylor & Francis Journals, vol. 14(3), pages 293-311.
    18. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    19. J. Paul Elhorst, 2003. "Specification and Estimation of Spatial Panel Data Models," International Regional Science Review, , vol. 26(3), pages 244-268, July.
    20. Bhaskar, V & To, Ted, 1999. "Minimum Wages for Ronald McDonald Monopsonies: A Theory of Monopsonistic Competition," Economic Journal, Royal Economic Society, vol. 109(455), pages 190-203, April.
    21. Bratsberg, Bernt & Turunen, Jarkko, 1996. "Wage curve evidence from panel data," Economics Letters, Elsevier, vol. 51(3), pages 345-353, June.
    22. Anselin, Luc & Bera, Anil K. & Florax, Raymond & Yoon, Mann J., 1996. "Simple diagnostic tests for spatial dependence," Regional Science and Urban Economics, Elsevier, vol. 26(1), pages 77-104, February.
    23. Martin Neil Baily, 1974. "Wages and Employment under Uncertain Demand," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(1), pages 37-50.
    24. Ringuede, Sebastien, 1998. "An efficiency wage model for small firms: firm size and wages," Economics Letters, Elsevier, vol. 59(2), pages 263-268, May.
    25. Cees Gorter & Jacques Poot, 1999. "The Impact of Labour Market Deregulation: Lessons from the," Tinbergen Institute Discussion Papers 99-001/3, Tinbergen Institute.
    26. repec:bla:scandj:v:92:y:1990:i:2:p:215-35 is not listed on IDEAS
    27. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    28. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1.
    29. Wheaton, William C. & Lewis, Mark J., 2002. "Urban Wages and Labor Market Agglomeration," Journal of Urban Economics, Elsevier, vol. 51(3), pages 542-562, May.
    30. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    31. Kennedy, Steven & Borland, Jeff, 2000. "A Wage Curve for Australia?," Oxford Economic Papers, Oxford University Press, vol. 52(4), pages 774-803, October.
    32. Campbell, Carl & Orszag, J. Michael, 1998. "A model of the wage curve," Economics Letters, Elsevier, vol. 59(1), pages 119-125, April.
    33. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    34. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 1-9, January.
    35. Freeman, Richard B., 1998. "War of the models: Which labour market institutions for the 21st century?1," Labour Economics, Elsevier, vol. 5(1), pages 1-24, March.
    36. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    37. Winter-Ebmer, Rudolf, 1996. "Wage curve, unemployment duration and compensating differentials," Labour Economics, Elsevier, vol. 3(4), pages 425-434, December.
    38. Baltagi, Badi H. & Blien, Uwe, 1998. "The German wage curve: evidence from the IAB employment sample," Economics Letters, Elsevier, vol. 61(2), pages 135-142, November.
    39. Janssens, Stefan & Konings, Jozef, 1998. "One more wage curve: the case of Belgium," Economics Letters, Elsevier, vol. 60(2), pages 223-227, August.
    40. Melvyn G. Coles, 2001. "Equilibrium Wage Dispersion, Firm Size and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 159-187, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    2. Víctor M. Montuenga‐Gómez & José M. Ramos‐Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
    3. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    4. Morrison, Philip S. & Papps, Kerry L. & Poot, Jacques, 2006. "Wages, employment, labour turnover and the accessibility of local labour markets," Labour Economics, Elsevier, vol. 13(5), pages 639-663, October.
    5. David Castro Lugo, 2006. "Curva salarial: una aplicación para el caso de México, 1993-2002," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 21(2), pages 233-273.
    6. Inmaculada Garcia-Mainar & Victor Montuenga-Gomez, 2003. "The Spanish Wage Curve: 1994-1996," Regional Studies, Taylor & Francis Journals, vol. 37(9), pages 929-945.
    7. Roberto Bande Ramudo & Melchor Fernández Fernández & Víctor Montuenga Gómez, 2011. "Wage flexibility and local labour markets: homogeneity of the wage curve in Spain," Documentos de trabajo - Analise Economica 0044, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    8. Esteban Sanroma & Raul Ramos, 2005. "Further Evidence on Disaggregated Wage Curves: The Case of Spain," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(3), pages 227-243, September.
    9. Ilias Livanos, 2010. "The Wage-Local Unemployment Relationship in a Highly Regulated Labour Market: Greece," Regional Studies, Taylor & Francis Journals, vol. 44(4), pages 389-400.
    10. Hynninen, Sanna-Mari, 2009. "Is there a wage curve for the highly educated?," ISER Working Paper Series 2009-17, Institute for Social and Economic Research.
    11. Simonetta Longhi, 2012. "Job Competition and the Wage Curve," Regional Studies, Taylor & Francis Journals, vol. 46(5), pages 611-620, August.
    12. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1589-1598.
    13. Haci Mevlut Karatas, 2017. "The Turkish Spatial Wage Curve," Econometrics, MDPI, vol. 5(3), pages 1-21, August.
    14. Johnes, Geraint, 2007. "The wage curve revisited: Estimates from a UK panel," Economics Letters, Elsevier, vol. 94(3), pages 414-420, March.
    15. Ipek Ilkaracan & Raziye Selim, 2002. "The Role of Unemployment in Wage Determination: Further Evidence on the Wage Curve from Turkey," SCEPA working paper series. 2002-11, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    16. Ramos, Raul & Duque, Juan C. & Surinach, Jordi, 2010. "Is the wage curve formal or informal? Evidence for Colombia," Economics Letters, Elsevier, vol. 109(2), pages 63-65, November.
    17. López Enciso, Enrique & Ramírez Giraldo, María Teresa (ed.), 2011. "Formación de precios y salarios en Colombia T.2," Books, Banco de la Republica de Colombia, volume 2, number 2011b-04, March.
    18. Kåre Johansen, 2002. "Regional Wage Curves Empirical Evidence from Norway," Working Paper Series 0302, Department of Economics, Norwegian University of Science and Technology.
    19. Jens Suedekum, 2005. "Increasing returns and spatial unemployment disparities," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 159-181, June.
    20. Baltagi, Badi H. & Blien, Uwe & Wolf, Katja, 2000. "The East German wage curve 1993-1998," Economics Letters, Elsevier, vol. 69(1), pages 25-31, October.

    More about this item

    Keywords

    Unemployment; wage formation; spatial analysis; local monopsony; Germany;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20040054. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.