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Regional Wage Rigidity: The European Union and United States Compared

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  • Michelle Baddeley
  • Ron Martin
  • Peter Tyler

Abstract

In recent years it has been pointed out that regional unemployment disparities are much more entrenched across member states of the European Union (E.U.) than they are in the U.S. A ‘conventional wisdom' has emerged to the effect that this difference is due in part to the greater degree of wage rigidity in E.U. regions. In this paper we explore this issue by estimating short run and long run real wage (in)flexibility for the regions in five core E.U. countries (Germany, France, Italy, the United Kingdom, and the Netherlands) and for the U.S. states for the period 1976–1994. We find that real wage (in)flexibility varies across regions both in the E.U. and the U.S., but that, on average, regional wages are no less flexible in E.U. core regions than in U.S. states. The paper also examines some of the possible correlates ofregional variations in wage (in)flexibility.

Suggested Citation

  • Michelle Baddeley & Ron Martin & Peter Tyler, 2000. "Regional Wage Rigidity: The European Union and United States Compared," Journal of Regional Science, Wiley Blackwell, vol. 40(1), pages 115-141, February.
    • Handle: RePEc:bla:jregsc:v:40:y:2000:i:1:p:115-141
    DOI: 10.1111/0022-4146.00167
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    Cited by:

    1. Roberto Basile & Alessandro Girardi & Marianna Mantuano & Giuseppe Russo, 2016. "Interregional Migration, Human Capital Externalities and Unemployment Dynamics: Evidence from Italian Provinces," CSEF Working Papers 460, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    2. Annekatrin Niebuhr & Nadia Granato & Anette Haas & Silke Hamann, 2012. "Does Labour Mobility Reduce Disparities between Regional Labour Markets in Germany?," Regional Studies, Taylor & Francis Journals, vol. 46(7), pages 841-858, September.
    3. Paolo Pasimeni, 2014. "An Optimum Currency Crisis," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 11(2), pages 173-204, December.
    4. Monastiriotis, Vassilis & Kaplanis, Ioannis, 2011. "Flexible employment and cross- regional adjustment," Working Papers 2072/179671, Universitat Rovira i Virgili, Department of Economics.
    5. Alexiadis, Stilianos & Eleftheriou, Konstantinos, 2010. "The Morphology of Income Convergence in US States: New Evidence using an Error-Correction-Model," MPRA Paper 20096, University Library of Munich, Germany.
    6. Mertens Antje, 2002. "Regional and Industrial Wage Dynamics in West Germany and the United States / Regionale und industrielle Lohndynamik in Westdeutschland und den USA," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 222(5), pages 584-608, October.
    7. Venera Timiryanova & Dina Krasnoselskaya & Natalia Kuzminykh, 2022. "Applying the Multilevel Approach in Estimation of Income Population Differences," Stats, MDPI, vol. 6(1), pages 1-32, December.
    8. Mirko Abbritti; Sebastian Weber, 2008. "Labor Market Rigidities and the Business Cycle: Price vs. Quantity Restricting Institutions," IHEID Working Papers 01-2008, Economics Section, The Graduate Institute of International Studies, revised Jan 2008.
    9. Bande, Roberto & Fernández, Melchor & Montuenga, Víctor, 2008. "Regional unemployment in Spain: Disparities, business cycle and wage setting," Labour Economics, Elsevier, vol. 15(5), pages 885-914, October.
    10. Inmaculada Garcia-Mainar & Victor Montuenga-Gomez, 2003. "The Spanish Wage Curve: 1994-1996," Regional Studies, Taylor & Francis Journals, vol. 37(9), pages 929-945.
    11. Helmut Herwartz & Annekatrin Niebuhr, 2017. "Regional Labor Market Performance in Europe," International Regional Science Review, , vol. 40(3), pages 270-296, May.
    12. Netšunajev, Aleksei & Glass, Katharina, 2017. "Uncertainty and employment dynamics in the euro area and the US," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 48-62.
    13. Mark J. Holmes & Jesús Otero, 2022. "The wage curve within and across regions: new insights from a pairwise view of US states," Empirical Economics, Springer, vol. 62(5), pages 2069-2089, May.
    14. Vassilis Monastiriotis & Stylianos Sakkas, 2021. "Employment mobility and labour market flexibility in the EU," JRC Working Papers on Territorial Modelling and Analysis 2021-01, Joint Research Centre.
    15. Peter Huber, 2013. "Labour Market Institutions and Regional Unemployment Disparities. Evidence for Europe. WWWforEurope Working Paper No. 29," WIFO Studies, WIFO, number 46890.
    16. Herwartz, Helmut & Niebuhr, Annekatrin, 2011. "Regional labor demand and national labor market institutions in the EU15," HWWI Research Papers 112, Hamburg Institute of International Economics (HWWI).

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