Wages and Employment Growth: Disaggregated Evidence for West Germany
33 Pages Posted: 11 May 2004
Date Written: April 2004
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.
Keywords: Employment growth, shift-share-analysis, regional wages, purchasing power argument
JEL Classification: J23, E24, R11
Suggested Citation: Suggested Citation