The effect of unemployment, aggregate wages, and spatial contiguity on local wages: An investigation with German district level data

Thiess Buettner ()
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Thiess Buettner: Centre for European Economic Research, P.O. Box 103443, D-68034 Mannheim, Germany
Authors registered in the RePEc Author Service: Thiess Büttner

Papers in Regional Science, 1999, vol. 78, issue 1, 47-67

Abstract: Despite spatial rigidity of collectively negotiated wages the local unemployment rate is found to have a significant negative impact on wages. This impact is shown to be consistent with both the wage-curve hypothesis and modern Phillips-curve modelling. Spatial contiguity effects are found in wages and unemployment and their neglect leads to an underestimation of the effect of local unemployment. Yet, the impact of local unemployment on wages turns out to be quite low as compared to studies for other countries. Some support for the hypothesis that negotiated wages suppress spatial wage flexibility comes from the finding that the impact of local unemployment on local wages decreases with its extent.

Keywords: Unemployment; wage formation; spatial analysis; local wages (search for similar items in EconPapers)
JEL-codes: J21 J30 R23 (search for similar items in EconPapers)
Date: 1999-03-25
Note: Received: 13 December 1996
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Citations: View citations in EconPapers (18)

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