Job Competition and the Wage Curve

Publication type

Research Paper

Series Number

4777

Series

Discussion Paper

Author

Publication date

March 10, 2010

Abstract:

The wage curve literature suggests a negative relationship between regional unemployment rates and regional wages; the most widely accepted explanations are efficiency wage and labour turnover costs theories in which the unemployment rate is a measure of job competition. Since it fails to correctly measure labour supply and demand, however, the unemployment rate is likely to be a biased measure of job competition.
This paper analyses the robustness of the wage curve to different ways of measuring job competition using data for the UK over the period 1997-2005 and concludes that efficiency wage and labour turnover costs theories do not seem to offer satisfactory explanations of the wage curve phenomenon.

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