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Local Wages and the Role of Unemployment

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  • Molho, Ian

Abstract

This paper sets out a model of pay setting in a spatial context. Employers in an area face upward sloping labor supply curves due to search behavior on the part of workers. They set wages with the aim of meeting recruitment targets, drawing workers from the immediate area as well as the surrounding migration hinterland. The impact of unemployment on local wages is examined in this context and it is argued that the common presumption that local employment should reduce wages does not always hold. Some empirical work at a disaggregated level of local labour market areas supported this argument. Copyright 1993 by Scottish Economic Society.

Suggested Citation

  • Molho, Ian, 1993. "Local Wages and the Role of Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(4), pages 375-390, November.
    • Handle: RePEc:bla:scotjp:v:40:y:1993:i:4:p:375-90
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