Wages and Employment Growth: Disaggregated Evidence for West Germany
HWWA Discussion Paper No. 275
35 Pages Posted: 18 Jun 2004
Date Written: 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
JEL Classification: J23, E24, R11
Suggested Citation: Suggested Citation