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REGIONAL HETEROGENEITY IN WAGE DISTRIBUTIONS: EVIDENCE FROM SPAIN

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Abstract:

ABSTRACT Regional differences in real wages have been shown to be both large and persistent in the United States and the U.K., as well as in the economies of other countries. Empirical evidence suggests that wage differentials adjusted for the cost of living cannot only be explained by the unequal spatial distribution of characteristics determining earnings. Rather, average wage gap decomposition reveals the important contribution made by regional heterogeneity in the price assigned to these characteristics. This paper proposes a method for assessing regional disparities in the entire wage distribution and for decomposing the effect of differences across regions in the endowments and prices of the characteristics. The hypothesis forwarded is that the results from previous studies obtained by comparing average regional wages may be partial and nonrobust. Empirical evidence from a matched employer–employee dataset for Spain confirms marked differences in wage distributions between regions, which do not result from worker and firm characteristics but from the increasing role of regional differences in the return to human capital.

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-9787.2011.00714.x

Affiliations: 1: Universitat Oberta de Catalunya. Avda Tibidabo 39-43, 08035 Barcelona, Spain; AQR—IREA, University of Barcelona, Avda Diagonal 690, 08034 Barcelona, Spain.  2: AQR—IREA, University of Barcelona. Avda Diagonal 690, 08034 Barcelona, Spain; European Commission, Joint Research Centre (JRC); Institute for Prospective Technological Studies (IPTS). C/ Inca Garcilaso 3, Seville, Spain.   3: AQR—IREA, University of Barcelona, Avda Diagonal 690, 08034 Barcelona, Spain; IZA and McGill University, Department of Economics, McGill University, 855 Sherbrooke Street West, H3A 2T7 Montreal, QC, Canada.  

Publication date: August 1, 2011

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