Regional Wage Spillover in Canada.

Abstract

The persistently high unemployment rate of the Atlantic Region of Canada may be a symptom of importation into the region of inappropriately high wage levels from other Canadian regions. A theoretical explanation for the existence of such interregional wage spillover is offered. The hypothesis of spillover is empirically examined using data on the wage change provisions of individual contracts in the manufacturing sector. Possible econometric problems associated with contract data are examined and corrective measures taken. Results of the estimation support the hypothesis that wage spillover plays a role in the determination of Atlantic Region wages. Copyright 1987 by MIT Press.