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Local unemployment and specialisation

Author

Listed:
  • Ritter, Peer
  • Walz, Uwe

Abstract

Recent empirical work has shown that there exists a negative relation between wages and unemployment estimated across regions. Our model recognises the spatial dimension of the so-called wage curve by using a Hotelling/Salop framework in which a finite number of firms compete for heterogeneous workers. We incorporate this set-up into an efficiency-wage framework. In setting wages firms perceive their influenae on the wage-unemployment trade-off, thus taking the employment decisions of their competitors as an externality. The model predicts that in larger local labour markets with firms demanding more specialised labour, workers receive higher wages and face lower unemployment.

Suggested Citation

  • Ritter, Peer & Walz, Uwe, 1998. "Local unemployment and specialisation," Tübinger Diskussionsbeiträge 135, University of Tübingen, School of Business and Economics.
    • Handle: RePEc:zbw:tuedps:135
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    References listed on IDEAS

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    Cited by:

    1. Harald Badinger & Thomas Url, 2002. "Determinants of regional unemployment: some evidence from Austria," Regional Studies, Taylor & Francis Journals, vol. 36(9), pages 977-988.

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    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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