Regional structure of wages and external economies in Spain

Regional data on wages for the Spanish Economy show that workers who live in developed regions earn more than workers in other regions. For example, the average wage in Madrid or in Catalonia -two of the most developed regions- is about a 50% higher than in Murcia -a region specialised in agriculture with low levels of per capita income-. New Economic Geography models, such as Krugman (1991), provide a possible explanation of why firms do not move from these regions to others where wages were lower. These kind of models describe how firms concentrate their production in one location due to the existence of increasing returns to scale and low transport costs in the presence of pecuniary external economies. Previous studies for the Spanish Economy use aggregate data to explain why average wages in the same sector are different across regions. The original contribution of this paper consists of using individual data on wages from the Encuesta de Presupuestos Familiares -carried out by the Instituto Nacional de Estadistica with reference to the years 1990-1991- to detect the existence and the nature of external economies. This information permits to control the influence of individual (gender, age, level of studies) and job (occupation, industry, full or part-time work) characteristics on wages to, first, detect the existence of external economies and, second, test alternative explanations of their presence: for example, the size of the labour market, the accumulation of the same kind of qualified workers or the geographical specialisation in a dominant manufacturing activity.

Regional structure of wages and external economies in Spain

Regional data on wages for the Spanish Economy show that workers who live in developed regions earn more than workers in other regions. For example, the average wage in Madrid or in Catalonia -two of the most developed regions- is about a 50% higher than in Murcia -a region specialised in agriculture with low levels of per capita income-. New Economic Geography models, such as Krugman (1991), provide a possible explanation of why firms do not move from these regions to others where wages were lower. These kind of models describe how firms concentrate their production in one location due to the existence of increasing returns to scale and low transport costs in the presence of pecuniary external economies. Previous studies for the Spanish Economy use aggregate data to explain why average wages in the same sector are different across regions. The original contribution of this paper consists of using individual data on wages from the Encuesta de Presupuestos Familiares -carried out by the Instituto Nacional de Estadistica with reference to the years 1990-1991- to detect the existence and the nature of external economies. This information permits to control the influence of individual (gender, age, level of studies) and job (occupation, industry, full or part-time work) characteristics on wages to, first, detect the existence of external economies and, second, test alternative explanations of their presence: for example, the size of the labour market, the accumulation of the same kind of qualified workers or the geographical specialisation in a dominant manufacturing activity

Regional structure of wages and external economies in Spain

Regional data on wages for the Spanish economy show that workers who live in developed regions earn more than workers in other regions. Literature on external economies provides a possible explanation of why firms do not move from these regions to others where wages are lower. Previous studies for the Spanish case use aggregated sectoral data to explain in terms of external economies why average wages are different across regions. The original contribution of this paper consists of using individual data to detect the existence and nature of external economies as an explanatory cause of territorial wage differences. With this aim, we have used individual data from the EPF 1990-91 (INE). This information permits us to control the influence of individual and job characteristics on wages to, first, detect the existence of external economies and, second, to test alternative explanations of their presence. The empirical evidence obtained confirms the relevance of territorial external economies and their influence on wages, as a result of improvements in the productive efficiency of the firm. In concrete terms, the more relevant external economies are associated with the regional human capital stock and geographical productive specialisation.regional labour markets, wages, human capital, external economies

Wage curves for Spain. Evidence from the family budget survey

This study explores the existence of a wage curve for Spain. To quantify this relationship for the Spanish economy, we used individual data from the EPF 1990-1991. The results show the presence of a wage curve with an elasticity of 0.13. The availability of very detailed information on wages and unemployment has also shown that less protected labour market groups young workers, manual workers and building sector workers- have a higher elasticity of wages to local unemployment. These results could be interpreted as a greater facility of firms in these segments to settle wages as a function of the unemployment rate.regional labour markets, unemployment rate, wage curve

Capital humano local y productividad en las provincias espanolas

In the last decade, different studies have tried to contrast empirically the existence of a relationship between local human capital and the productivity of a given territory, and the possible presence of external economies. The most common result has been the finding of a positive relationship between both variables. However, there is no difference when trying to explain this result: a first group of authors remark the role of external economies associated to human capital, while a second group believes in the rellevance of complementary relationships among the different productive factors and, in particular, among human and physical capital. The main objective of this paper is to analyse the existence of a possible relationship between the stock of human capital in the Spanish provinces (NUTS-III) and their productivity, and next, find out if the channel of transmission is related to external economies. For this reason, a two-stage methodology is applied. In the first stage, a Mincer equation is estimated using information from the Encuesta de Presupuestos Familiares (Family Budget Survey) to obtain estimates of the average productivity of the Spanish provinces once the effect of individual human capital is controlled. In a second stage, the estimates of territorial productivity is introduced as the endogenous variable in a new equation where explanatory variables try to reflect the stock of human capital at every province. From this second regression, a positive relationship is found. However, the main conclusion of the paper is that this relationship cannot be explained by the impact of exogenous local human capital external economies, but by other demand factors.regional labour markets, wages, human capital, external economies

El mercado de trabajo espanol en la union monetaria. Flexibilidad de salarios y politica laboral

The low interregional labour mobility and the incapacity of the Community Budget to act as a stabilization tool imply that the Spanish labour market should have a high wage flexibility to react quickly in response to asymmetric shocks in the framework defined by the Monetary Union. In this paper, we study the rigidity of wages and its possible determinants using empirical evidence on wage rigidity for the OECD countries from the estimation of wage equations following a Phillips curve specification augmented with expectations. The obtained results permit to affirm that the Spanish labour market performs poorly with a high wage rigidity and as a result with a low capacity to react in response to recessive shocks. The analysis of the determinants of this high rigidity permits to obtain the following conclusions. First, a higher wage flexibility could be obtained through a coordinated and consensuated action of social and economic agents in the wage bargaining process. Second, active labour market policies, specially related to formation, or passive policies, like a decrease in the duration of unemployment subsidies, can also increase wage flexibility. And, third, a higher flexibility could be obtained moving to more centralized or decentralized wage bargaining systems.monetary union, institutions and labour markets, wage flexibility