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The Wage Curve and Agglomeration

In: The European Labour Market. Regional Dimensions

Author

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  • Jens Südekum

    (University of Duisburg-Essen)

Abstract
New Economic Geography models usually abstract from unemployment. By contrast, wage curve models (Blanchflower and Oswald, 1994) imply a negative correlation between regional unemployment and wages, but fail to account for agglomeration effects. Relying upon some stylised facts concerning the EU-15 regions a theoretical model is built combining a wage curve with an increasing returns technology. Large ‘core’ regions turn out having both higher equilibrium wages and lower unemployment rates than peripheral regions. Regional disparities can develop endogenously and labour mobility does not negate the wage curve mechanism, but rather strengthens it.

Suggested Citation

  • Jens Südekum, 2006. "The Wage Curve and Agglomeration," AIEL Series in Labour Economics, in: Floro Ernesto Caroleo & Sergio Destefanis (ed.), The European Labour Market. Regional Dimensions, edition 1, chapter 10, pages 203-219, AIEL - Associazione Italiana Economisti del Lavoro.
    • Handle: RePEc:ail:chapts:01-10
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    Cited by:

    1. Cristiano Perugini & Marcello Signorelli, 2007. "Labour Market Performance Differentials and Dynamics in EU-15 Countries and Regions," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 4(2), pages 209-262, September.

    More about this item

    Keywords

    New Economic Geography; wage curve; increasing returns; regional inequalities.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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