Regional Wage Curves Empirical Evidence from Norway

Abstract

The papers studies wage formation using panel data for a large sample of Norwegian municipalities covering the time period 1970—1992. The main conclusions are the following. Regional manufacturing wages are negatively related to regional unemployment, but the effects of open as well as total regional unemployment are small. We find a numerically important wage dampening effect of labour market programs. However, we can not reject the null that only total unemployment matters. Finally, manufacturing profitability is important in shaping regional manufacturing wages and reduced regional payroll taxes are almost fully transmitted into reduced regional wage costs.