Domestic wage determination: Regional Spillovers and inward investment

This paper evaluates the extent of inter- industry, and inter-regional wage spillovers across the UK. A large literature exists suggesting that wages elsewhere affect wage determination and levels of satisfaction, but this paper extends the analysis to examine the effects of inward investment in the process. Thus far the specific effect of foreign wages on domestic wage determination has not been evaluated. Using industry and regional level panel data for the UK the paper reports evidence that such wage spillovers do occur, and that they are more widespread for skilled, than for unskilled workers and also lower in areas of high unemployment.