Jm. Dyrstad et K. Johansen, Regional wage responses to unemployment and profitability: Empirical evidence from Norwegian manufacturing industries, OX B ECON S, 62(1), 2000, pp. 101
This paper studies regional wage determination using panel data from a larg
e sample of Norwegian municipalities covering the time period 1970-1988. Th
e main conclusion is that regional manufacturing wages are significantly af
fected by regional manufacturing profitability as well as regional unemploy
ment. The estimated regional insider weight is slightly above 0.1 and very
stable irrespective of specification. The size of the regional unemployment
coefficient is rather small, while aggregate unemployment is more importan
t. However, the total long-run unemployment elasticity is -0.1, implying th
at the mechanisms behind this empirical regularity may differ across countr
ies. Our study provide evidence in favour of a hypothesis that unemployment
mainly affects Norwegian wages through central wage settlements, while the
effect working through firm level wage setting is more limited.