A semiparametric approach to examine wage flexibility

Abstract

This article analyses wage flexibility within the framework of a semiparametric panel data model by using a bi-dimensional nonparametric term in the wage regression. The results point to a high degree of wage rigidity in Spain. However, semiparametric estimation allows us to find an interaction effect involving regional unemployment and productivity when explaining regional wages and, as a result of that, some signs of flexibility in the Spanish labour market.