Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104894
Authors: 
Ritter, Peer
Walz, Uwe
Year of Publication: 
1998
Series/Report no.: 
Tübinger Diskussionsbeiträge 135
Abstract: 
Recent empirical work has shown that there exists a negative relation between wages and unemployment estimated across regions. Our model recognises the spatial dimension of the so-called wage curve by using a Hotelling/Salop framework in which a finite number of firms compete for heterogeneous workers. We incorporate this set-up into an efficiency-wage framework. In setting wages firms perceive their influenae on the wage-unemployment trade-off, thus taking the employment decisions of their competitors as an externality. The model predicts that in larger local labour markets with firms demanding more specialised labour, workers receive higher wages and face lower unemployment.
Subjects: 
specialization and heterogeneity of labour
efficiency wages
local unemployment
JEL: 
J21
J41
R23
Document Type: 
Working Paper

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