The wage curve and local monopsony power
Jokinen, J. (2020). The wage curve and local monopsony power. Annals of Regional Science, 64(1), 159-183. https://doi.org/10.1007/s00168-019-00966-3
Published inAnnals of Regional Science
DisciplineEmpirical MicroeconomicsPäätöksentekoa tukeva taloustiede ja talouden kilpailukyky (painoala)TaloustiedeBasic or discovery scholarshipEmpirical MicroeconomicsPolicy-Relevant Economics and Competitiveness of Economy (focus area)EconomicsBasic or discovery scholarship
© The Author(s) 2019
Using longitudinal micro-data from Finland, a country with a geographically dispersed population and relatively long distances between local labor markets, this paper examines the responsiveness of the pay level to local unemployment conditions. In particular, this study tests the hypothesis that the pay level is more responsive to the unemployment level in less agglomerated and more remote regions as might be expected if employers have a higher degree of monopsony power in such regions. The results consistently suggest that the pay level is lower in localities with a higher unemployment level and, hence, provide strong support for the so-called wage curve hypothesis, which predicts that a negative relationship exists between local unemployment and the pay level. Although the results provide some evidence that the magnitude of the regional pay–unemployment relationship varies across different regions of the country, the findings do not provide consistent support for the monopsony power hypothesis. In particular, after controlling for unobserved worker heterogeneity, the responsiveness of the pay level to the local unemployment conditions is similar across regions with different degrees of economic agglomeration. ...
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- Kauppakorkeakoulu 
Additional information about fundingThis study was funded by the OP-Pohjola Group Research Foundation (Grant Number 201200100).
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