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Local unemployment and specialisation

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  • Ritter, Peer
  • Walz, Uwe

Abstract

Recent empirical work has shown that there exists a negative relation between wages and unemployment estimated across regions. Our model recognises the spatial dimension of the so-called wage curve by using a Hotelling/Salop framework in which a finite number of firms compete for heterogeneous workers. We incorporate this set-up into an efficiency-wage framework. In setting wages firms perceive their influenae on the wage-unemployment trade-off, thus taking the employment decisions of their competitors as an externality. The model predicts that in larger local labour markets with firms demanding more specialised labour, workers receive higher wages and face lower unemployment.

Suggested Citation

  • Ritter, Peer & Walz, Uwe, 1998. "Local unemployment and specialisation," Tübinger Diskussionsbeiträge 135, University of Tübingen, School of Business and Economics.
    • Handle: RePEc:zbw:tuedps:135
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    File URL: https://www.econstor.eu/bitstream/10419/104894/1/tdb135.pdf
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    References listed on IDEAS

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    3. HAMILTON, Jonathan & THISSE, Jacques-François & ZENOU, Yves, 1997. "Skill acquisition and wage competition with heterogeneous workers and firms," LIDAM Discussion Papers CORE 1997022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    6. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    7. Zenou, Yves & Smith, Tony E., 1995. "Efficiency wages, involuntary unemployment and urban spatial structure," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 547-573, August.
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    9. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
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    Cited by:

    1. Harald Badinger & Thomas Url, 2002. "Determinants of regional unemployment: some evidence from Austria," Regional Studies, Taylor & Francis Journals, vol. 36(9), pages 977-988.

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    More about this item

    Keywords

    specialization and heterogeneity of labour; efficiency wages; local unemployment;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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