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Journal of Economic Integration 2017 March;32(1) :35-64.
DOI: https://doi.org/10.11130/jei.2017.32.1.35
Wage Convergence across European Regions
: Do International Borders Matter?
Amber Naz
Nisar Ahmad and 
Amjad Naveed 
Sultan Qaboos University, Oman
University of Southern Denmark, Denmark
Corresponding Author: Amjad Naveed ,Tel: +4565501247, Fax: +4565501779, Email: amjadn@sam.sdu.dk, amjadnaveed9@yahoo.com
Copyright ©2017 Journal of Economic Integration
ABSTRACT
This study focuses on wage convergence among the member states of the European Union by addressing three important questions. First, is there average wage convergence in European Union regions? Second, if there is wage convergence, are regional wage levels converging to a single, steady state level (unconditional convergence) or to their own steady state level (conditional convergence)? Third, do international borders matter for average wage convergence? By using a panel data set covering 203 Nomenclature of Territorial Units for Statistics-2 level regions from 1996 to 2006, the present study finds wage convergence for internal regions (regions within the same country) but no evidence of convergence for border regions (neighboring regions across international borders). These results imply that wage convergence is somehow restricted by international borders. These results are robust with both parametric and non-parametric approaches of testing convergence.

JEL Classification
C01: Econometrics
C12: Hypothesis Testing: General
C23: Models with Panel Data; Longitudinal Data; Spatial Time Series
F15: Economic Integration
J31: Wage Level and Structure; Wage Differentials
Keywords: Average Wage | Convergence | Panel Unit Root Test | Factor Mobility | Border Regions
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