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The effect of labour tightness on wages at the regional level in Central Europe

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  • Lajos Tamás Szabó

    (Central Bank of Hungary)

Abstract

I estimate the effect of tightness on wages in Hungary and Slovakia. The Mortensen Pissarides model predicts a positive relationship but the empirical evidence is scarce. I instrument tightness by the distance of a district from the Austrian border, interacted with a dummy that marks the opening of the Austrian labour market to these countries in 2011. I find a positive effect of tightness on wages, which is in line with the conclusion of the models. If tightness increase by 1 per cent than ceteris paribus wages increase by roughly 0.2 per cent both in Hungary and Slovakia as well.

Suggested Citation

  • Lajos Tamás Szabó, 2024. "The effect of labour tightness on wages at the regional level in Central Europe," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 58(1), pages 1-23, December.
    • Handle: RePEc:spr:jlabrs:v:58:y:2024:i:1:d:10.1186_s12651-024-00383-w
    DOI: 10.1186/s12651-024-00383-w
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    More about this item

    Keywords

    Local labour markets; Labour market tightness; Wage equation;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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