Still Searching for the Wage Curve: Evidence from Germany and Italy

52 Pages Posted: 20 Feb 2007

See all articles by Andreas Ammermueller

Andreas Ammermueller

Federal Ministry of Labour and Social Affairs

Claudio Lucifora

Università Cattolica del Sacro Cuore di Milano ; IZA Institute of Labor Economics

Federica Origo

University of Bergamo

Thomas Zwick

University of Würzburg - Business Administration & Economics; Centre for European Economic Research (ZEW); Maastricht University - Research Centre for Education and the Labour Market (ROA)

Date Written: 2007

Abstract

This paper investigates the functioning of regional labour markets in Italy and Germany for different employee groups. In the light of high and persistent differences in unemployment and wage rates between the North and South of Italy and the West and East of Germany, we first derive theoretical hypotheses on group specific correlations between regional unemployment and individual wages. Using micro data on hourly wages properly matched to local unemployment rates, we specify and empirically test different wage equations. On the basis of our results, we find no evidence for the existence of a "wage curve" in Italy. In the case of Germany, results are quite sensitive to the model specification and the employee group considered. In both countries, the reaction of wages to local unemployment varies significantly along the wage distribution, being more sensitive around the median quantiles. We conclude that there is no uniform wage curve and call for a differentiated analysis for various groups, taking into account the respective institutional setting.

Keywords: wage curve, local labour markets, quantile regressions

JEL Classification: J3, J6, R1

Suggested Citation

Ammermueller, Andreas and Lucifora, Claudio and Origo, Federica and Zwick, Thomas, Still Searching for the Wage Curve: Evidence from Germany and Italy (2007). ZEW Discussion Paper No. 07-008; IZA Discussion Paper No. 2674. Available at SSRN: https://ssrn.com/abstract=963975

Andreas Ammermueller (Contact Author)

Federal Ministry of Labour and Social Affairs ( email )

Berlin, 11017
Germany

Claudio Lucifora

Università Cattolica del Sacro Cuore di Milano ( email )

Department of Economics and Finance
Largo Gemelli, 1
20123 Milano
Italy
+39 027 234 2525 (Phone)
+39 027 234 2781 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Federica Origo

University of Bergamo ( email )

Via Salvecchio, 19
Bergamo, 24129
Italy

Thomas Zwick

University of Würzburg - Business Administration & Economics ( email )

Sanderring 2
Wuerzburg, D-97070
Germany

Centre for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Maastricht University - Research Centre for Education and the Labour Market (ROA) ( email )

P.O. Box 616
Maastricht, MD6200
Netherlands

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