Regional Wage Adjustments and Unemployment: Estimating the Time-Varying Wage Curve (in English)

Kamil Galušèák () and Daniel Münich
Additional contact information
Kamil Galušèák: Czech National Bank, Prague
Authors registered in the RePEc Author Service: Kamil Galuscak

Czech Journal of Economics and Finance (Finance a uver), 2005, vol. 55, issue 1-2, 68-82

Abstract: This paper investigates the flexibility of real wages at the regional level by estimating the wage curve, the relationship between regional unemployment, and the regional level of wages. For this purpose the authors use a sample of annual district-level unemployment and wage data in the Czech Republic from 1993 to 2001. Previous estimates of the wage curve for the Czech Republic suggested that the regional flexibility of real wages is extraordinarily low. Taking into account the endogeneity of unemployment, the authors' results indicate that regional real wages are flexible at the level observed in most developed and developing economies. The temporary deterioration in the regional flexibility observed during the 1997-99 Czech recession is explained by the standard efficiency wage model. Some indication of weakening elasticity since the end of the 1990s is probably associated with the sharp rise in the incidence of long-term unemployment. As this trend is expected to continue, it could further attenuate the elasticity and complicate adjustment processes if adverse shocks appear in the future, particularly after the Czech Republic's anticipated entry into the European Monetary Union.

Keywords: wage curve; wage flexibility; unemployment; panel data (search for similar items in EconPapers)
JEL-codes: C23 E24 J31 J64 (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://journal.fsv.cuni.cz/storage/1007_s_068_082.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:55:y:2005:i:1-2:p:68-82

Access Statistics for this article

More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC.
Bibliographic data for series maintained by Natalie Svarcova ().