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The wage curve : evidence from the Finnish metal industry panel data

Author

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  • Tuomas Pekkarinen

    (European University Institute, Department of Economics, Italy)

Abstract

In this paper we study the wage curve with Finnish metal industry panel data from the period 1991–95. As an unemployment variable we use the unemployment rate of the regional county. The unemployment rate is split into short- and long-term unemployment. The effect of active labour market policies is controlled for by augmenting the wage equation with a variable for subsidised employment schemes. The estimated unemployment elasticity of wages in the Finnish metal industry is somewhat smaller than the elasticities reported by other studies. Long-term unemployment increases wages and subsidised employment schemes decrease them. Their combined effect is zero. The regional fixed effects estimate of the slope of the wage curve is –0.04. The dependent variable is the logarithm of the fixed hourly wage and the unemployment variable is corrected so that the long-term unemployed are removed from the pool of unemployed and the labour force and the workers in subsidised employment schemes are considered as unemployed. Estimations with regional means indicate that common group errors bias the estimates of standard errors significantly.

Suggested Citation

  • Tuomas Pekkarinen, 2001. "The wage curve : evidence from the Finnish metal industry panel data," Finnish Economic Papers, Finnish Economic Association, vol. 14(1), pages 51-60, Spring.
    • Handle: RePEc:fep:journl:v:14:y:2001:i:1:p:51-60
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