A1 Journal article (refereed)
The wage curve and local monopsony power (2020)
Jokinen, J. (2020). The wage curve and local monopsony power. Annals of Regional Science, 64(1), 159-183. https://doi.org/10.1007/s00168-019-00966-3
JYU authors or editors
Publication details
All authors or editors: Jokinen, Juho
Journal or series: Annals of Regional Science
ISSN: 0570-1864
eISSN: 1432-0592
Publication year: 2020
Volume: 64
Issue number: 1
Pages range: 159-183
Publisher: Springer
Publication country: Germany
Publication language: English
DOI: https://doi.org/10.1007/s00168-019-00966-3
Publication open access: Openly available
Publication channel open access: Partially open access channel
Publication is parallel published (JYX): https://jyx.jyu.fi/handle/123456789/67437
Abstract
Using longitudinal micro-data from Finland, a country with a geographically dispersed population and relatively long distances between local labor markets, this paper examines the responsiveness of the pay level to local unemployment conditions. In particular, this study tests the hypothesis that the pay level is more responsive to the unemployment level in less agglomerated and more remote regions as might be expected if employers have a higher degree of monopsony power in such regions. The results consistently suggest that the pay level is lower in localities with a higher unemployment level and, hence, provide strong support for the so-called wage curve hypothesis, which predicts that a negative relationship exists between local unemployment and the pay level. Although the results provide some evidence that the magnitude of the regional pay–unemployment relationship varies across different regions of the country, the findings do not provide consistent support for the monopsony power hypothesis. In particular, after controlling for unobserved worker heterogeneity, the responsiveness of the pay level to the local unemployment conditions is similar across regions with different degrees of economic agglomeration.
Keywords: labour market; wage development; wage level; wages; unemployment; regional differences
Free keywords: pay level; unemployment; wage curve
Contributing organizations
Ministry reporting: Yes
VIRTA submission year: 2020
JUFO rating: 1
