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


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

Reporting Year: 2020

JUFO rating: 1

Last updated on 2022-17-06 at 11:10