The Economic Imperative: Cities Need Migrants

The policy responses to Covid-19 have triggered large-scale reverse migration from cities to rural areas in developing countries, exposing the vulnerability of migrants living precarious lives in cities, giving rise to debates asserting to migration as undesirable and favouring policy options to discourage the process. However, the very basis of spatial concentration and formation of cities is presence of agglomeration economies, benefits accruing to economic agents operating in cities. Presence of these agglomeration benefits in local labour markets manifests themselves in the form of an upward sloping wage curve in urban areas. We estimate the upward sloping wage curve for various size classes of cities in Indian economy and establish the presence of positive returns to occupation and industry concentration at urban locations. Controlling for worker-specific characteristics influencing wages, we establish that higher the share of an industry or an occupation in local employment as compared to national economy, the desirability of firms to pay higher wages increases. For casual labourers, occupational concentration results in higher wages. However, impact of industry concentration varies across sectors. Results supporting presence of upward sloping urban wage curve, therefore, endorse policies to correct the market failure in cities and promote migration as a desirable process. JEL Classification Codes: J2, R2

Spatial aspects of wage curve estimation in Russia

The wage curve is traditionally defined as the negative relationship between wages and unemployment rates (taking into account various control variables). It was empirically shown that the wage curve exists in some countries, including Russia. However, usually in such studies with data for the Russian regions, the mutual influence of Russian regions is not taken into account. This could create the problem of omitted variable bias. In this paper, we took into account the corresponding impact using spatial-econometric models and gave a detailed interpretation of the results. The estimate of the parameter reflecting the effect of unemployment on wages in the model without spatial effects is almost twice the corresponding estimate in the models where these effects are taken into account. According to panel data for 2005–2018 for 81 regions we estimated the partial marginal effects of changes in unemployment in one region on wages in the other regions. Similar calculations were made for the other variables. Using partial marginal effects, we found for each region: 1) the regions most affected by this one, 2) the regions, changes in which will most likely affect the selected one. This is important, for example, for assessing consequences of government programs etc

The Wage Curve Across the Wealth Distribution

This paper studies the relationship between wage and unemployment rate across the wealth distribution. Using microdata from Norway covering the entire Norwegian population of residents between 2000 and 2015, we introduce four novel findings on this relationship. First, the share of unemployed individuals belonging to the bottom decile of the gross wealth distribution is tenfold larger than the share belonging to the top decile (34% and 3.2%). Second, the former moves in a specular manner to the latter. Third, the negative slope of the wage curve is confirmed. Fourth, the wage-to-unemployment ratio increases monotonically with gross wealth, and decreases monotonically with net wealth for negative values of net wealth. (Stone Center on Socio-Economic Inequality Working Paper)

The wage curve and local monopsony power

Using longitudinal micro-data from Finland, a country with a geographically dispersed population and relatively long distances between local labor markets, this paper examines the responsiveness of the pay level to local unemployment conditions. In particular, this study tests the hypothesis that the pay level is more responsive to the unemployment level in less agglomerated and more remote regions as might be expected if employers have a higher degree of monopsony power in such regions. The results consistently suggest that the pay level is lower in localities with a higher unemployment level and, hence, provide strong support for the so-called wage curve hypothesis, which predicts that a negative relationship exists between local unemployment and the pay level. Although the results provide some evidence that the magnitude of the regional pay–unemployment relationship varies across different regions of the country, the findings do not provide consistent support for the monopsony power hypothesis. In particular, after controlling for unobserved worker heterogeneity, the responsiveness of the pay level to the local unemployment conditions is similar across regions with different degrees of economic agglomeration.