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ECONOMIC REMOTENESS AND WAGE DISPARITIES IN ROMANIA

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ABSTRACT

This paper looks at the link between wage disparities and market access for the Romanian regions. First, we derive an econometric specification which relates the income levels of a particular location with a weighted sum of the volume of economic activities of the surrounding locations (market access). Then, empirically, we estimate this econometric specification for a sample of 42 Romanian regions in the year 2006. The results show that market access is statistically significant and quantitatively important in explaining cross‐county variation in Romanian wages. Moreover, our results are robust to the inclusion of control variables thought to be important in explaining Romanian wages as it is the case with human capital and innovation levels. After controlling for these variables, market access remains still positive and statistically significant although its influence on wages decreases around 25 per cent. Finally some policy conclusions are also drawn.
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Document Type: Research Article

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Publication date: 2011-12-01

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