Duncan Roth (p), Gabriel Ahlfeldt , Tobias Seidel

Damiaan Persyn

This paper analyses the regional implications of the statutory minimum wage that was introduced in Germany in the year 2015. Using a difference-in-differences estimation strategy and employing administrative data, we find that municipalities in which the share of workers that initially earned less than the minimum wage experienced a relative increase in wages at the lower end of the wage distribution. The policy therefore contributed to spatial convergence in lower-tail wages. Increases in wages are, however, not accompanied with by reductions in employment levels of by increases in the unemployment rate. While the minimum wage did not lead to increased migration, high-bite municipalities experienced an increase in the share of employees working in other municipalities, suggesting that the policy imposed costs on some workers in the form of commuting. Furthermore, we find that corporate tax revenues fell in high-bite municipalities, while increased labour costs were in parts passed on to consumers through higher prices for non-tradable goods and services. Taken together, the minimum wage has relatively benefitted low-wage workers in high-bite municipalities and transferred surplus from firms to workers.

Sabine D'Costa (p), Almudena Sevilla

Duncan Roth

This paper contributes to the urban wage premium literature by looking at gender differences as a new, important source of heterogeneity in agglomeration economies. This paper is the first to document gender differences in the urban wage premium using a large representative panel of workers recording their personal and job characteristics as well as their transitions across labour markets and to explain the differences in light of existing theories.
We use a large and representative panel of workers in Great Britain based on the ASHE/NES survey (sampling 1% of workers) covering the years 1998-2008. We follow the existing literature estimating the urban wage premium using fixed effects on large microeconomic datasets of workers’ wages. This controls for time-invariant unobserved factors at the worker level such as unobserved ability, ambition or productivity that may affect whether a worker locates in a city. Before controlling for sorting, we find that the urban wage premium is the same for men and women. Once sorting is taken into account using worker fixed effects, we document that the urban wage premium is 43% greater for female workers than for male workers. Results are robust after controlling for time-varying heterogeneity using IV methods. Given that current estimates in the literature are based on males, i.e. approximately half of the work force, the first benefit is to ascertain the extent to which the actual premium is underestimated in previous studies. Further contribution comes from being able to document gender differences more reliably than was previously done using worker fixed effects since we observe a large number of workplace transitions in a large representative panel of workers. This enables us to compare our estimates with the rest of the empirical literature on the urban wage premium.
The richness of our data enables us to then explore various channels that can theoretically explain the gender differences in urban wage premium. In particular, we uncover the importance of sorting of more productive workers into cities, which is more pronounced for men than women. The large remaining gender difference is then investigated. Our results suggest that other channels resulting from agglomeration economies present in cities are at play.

Eloiza R F Almeida (p), Veneziano de Castro Araújo , Solange Ledi Gonçalves

Sabine D'costa

This paper aims to empirically analyse the Urban Wage Premium (UWP) of Metropolitan Areas (MAs), addressing the role of the workers' occupational skill, education, and tenure in UWP composition at different agglomeration levels, but also investigating the main components of wage differences between MAs. Our contribution to this line of research relies on the possibility of investigate the UWP for both sectors (formal and informal) and the application of Heckman's correction, since it is possible to reconstruct the panel of unemployed individuals using a wide comprehensive database covering Brazilian workers from 2012 to 2018, and considering workers of many sectors, social levels, and formality status. The results, supported by robustness checks, indicate that there is a UWP for workers in MAs, but that is decreasing as agglomeration becomes denser. By exploring the workers' formality status, it was verified that formal workers UWP is in line with previous studies while informal workers UWP drives the overall results, repeating the decreasing behaviour. The fact that there is a distinct UWP pattern between these groups according to the agglomeration level is new in UWP studies for Brazil since the majority of them does not comprises informal jobs. When located in denser areas, workers in high-skilled occupations or with a higher level of education are better paid, regardless if formal or informal. While informal workers in low-skilled occupations or with lower education level have a higher premium if located in Small MAs.

Ragnar Nymoen , Damiaan Persyn (p)

Eloiza Almeida

The degree of wage rigidity in a region or country plays a crucial role in determining how economics shocks are translated into changes in the level of (un)employment. This is the case both in the real world, as well as in macro-economic models that are used to evaluate fiscal and monetary policy. Most empirical and theoretical models work on wage rigidities operate on the national level. However, it is clear especially in Europe that one the one hand there exist both large and persistent regional unemployment differences, which calls for analysis on the regional level; but on the other hand institutions such labour unions or legislation on wage negotiations make that variables at the national level may also have a large influence on regional wages. This paper therefore estimates wage rigidities at the regional level, but controls for relevant determinants at the national level. We are not the first to consider such a mix of regional and national variables in regional wage regressions, see for example (Jimeno and Bentolila 1998). To the best of our knowledge, however, we are the first to do this systematically on the level of the EU.

As a second contribution to this literature, we argue that there exists an aggregation bias when estimating wage rigidities on the national level, if the true relationship between wages and (un)employment is at the regional level and non-log-linear. Our results show that estimating wage curves on national data leads to higher parameter estimates (a steeper wage curve).

This stems from the combination of a log-linear functional form and regional heterogeneity if the true underlying relationship between regional wages and regional unemployment is not log-linear. We provide results to show that 1/ only when regional unemployment rates are equal, the country-level wage curve coincides with the underlying regional wage curves. 2/ the national wage curve is steeper compared to the regional wage curve is the variation in unemployment stems from the region with relatively low unemployment. 3/ the national wage curve is flatter when the variation stems from the region with relatively high unemployment region. Such spatial aggregation bias was already described by R.G. Lipsey in 1960, but seems to have been largely ignored since.

The data we use is from Eurostat. We consider three sectors: C, F and G-I. The data is yearly, from 2000 to 2016. Our estimation strategy builds on Nymoen and Rodseth (2003).