The wage-local unemployment relationship in a highly regulated labour market: Greece

Abstract

Using data obtained from 80,000 employees, this paper examines the relationship between individual wages and regional unemployment in Greece. The findings of this study highlight the dynamics of the local labour markets in a case, such as Greece, where the OECD claims that wage flexibility is limited. This study does not find evidence that wages in Greece are rigid but finds a wage curve elasticity of close to -0.1, which corresponds to evidence from many counties. Interestingly, graduates are found to be the most responsive group of workers to the behaviour of local labour markets. The high levels of wage flexibility may be explained by very low levels of geographic mobility.