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Regional Wage Rigidity: The European Union and United States Compared

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In recent years it has been pointed out that regional unemployment disparities are much more entrenched across member states of the European Union (E.U.) than they are in the U.S. A ‘conventional wisdom' has emerged to the effect that this difference is due in part to the greater degree of wage rigidity in E.U. regions. In this paper we explore this issue by estimating short run and long run real wage (in)flexibility for the regions in five core E.U. countries (Germany, France, Italy, the United Kingdom, and the Netherlands) and for the U.S. states for the period 1976–1994. We find that real wage (in)flexibility varies across regions both in the E.U. and the U.S., but that, on average, regional wages are no less flexible in E.U. core regions than in U.S. states. The paper also examines some of the possible correlates ofregional variations in wage (in)flexibility.

Document Type: Research Article


Affiliations: University of Cambridge

Publication date: February 1, 2000


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