Wages and Employment Growth: Disaggregated Evidence for West Germany
University of Duisburg-Essen; Institute for the Study of Labor (IZA)
Institute for Employment Research (IAB); Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 1128
We address the effects of wages on employment growth on the basis of a theoretical model from which cost and demand effects can be derived. In the empirical analysis we take a highly disaggregated perspective and apply a newly developed shift-share regression technique on an exhaustive and very accurate data set for West Germany. The regression shows that the impact of regional wages on employment growth is significantly negative. There is some variation of this effect across sectors, but in no case we find support for the claim that an exogenous wage increase leads to higher employment growth.
Number of Pages in PDF File: 33
Keywords: Employment growth, shift-share-analysis, regional wages, purchasing power argument
JEL Classification: J23, E24, R11working papers series
Date posted: May 11, 2004
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