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Real wages, amenities and the adjustment of working hours across regional labour markets

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  • Schlüter, Teresa

Abstract

This article establishes a link between the traditional labour economics and the urban economics literature by analyzing differences in working hours across regional labour market areas in the UK. Using a real wage index reflecting skill adjusted earnings net of quality adjusted house prices in Britain and panel data on working hours the effect of regional real wages on labour supply is assessed. The identification strategy relies on workers who move across 157 labour market areas in Britain and includes individual fixed effects. The main finding is that working hours are significantly higher in labour market areas that offer lower real wages. Decreasing real wages by £1000 results in an increase of working hours of 0.3 %. Real wage differentials can be seen as a proxy for the local amenity level. I can replicate my finding including a set of amenities instead of the real wage index. The effect is mainly due to labour supply decisions of low skilled workers who work significantly longer hours in low real wage areas than high skilled workers. This indicates that low skilled workers are willing to increase their labour supply in order to afford living in high amenity areas.

Suggested Citation

  • Schlüter, Teresa, 2013. "Real wages, amenities and the adjustment of working hours across regional labour markets," LSE Research Online Documents on Economics 58529, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:58529
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    File URL: http://eprints.lse.ac.uk/58529/
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    More about this item

    JEL classification:

    • N0 - Economic History - - General
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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