Spatial wage disparities: Sorting matters!

https://doi.org/10.1016/j.jue.2007.04.004Get rights and content

Abstract

Spatial wage disparities can result from spatial differences in the skill composition of the workforce, in non-human endowments, and in local interactions. To distinguish between these explanations, we estimate a model of wage determination across local labour markets using a very large panel of French workers. We control for worker characteristics, worker fixed effects, industry fixed effects, and the characteristics of the local labour market. Our findings suggest that individual skills account for a large fraction of existing spatial wage disparities with strong evidence of spatial sorting by skills. Interaction effects are mostly driven by the local density of employment. Not controlling for worker heterogeneity leads to very biased estimates of interaction effects. Endowments only appear to play a small role.

References (30)

  • P.R. Coelho et al.

    The end of the North–South wage differential: Reply

    American Economic Review

    (1973)
  • D. Cohen et al.

    French unemployment: A transatlantic perspective

    Economic Policy: A European Forum

    (1997)
  • Combes P.-P., Duranton G., Gobillon L., 2004. Spatial wage disparities: Sorting matters! Discussion paper 4240....
  • G.B. Dahl

    Mobility and the return to education: Testing a Roy model with multiple markets

    Econometrica

    (2002)
  • G. Duranton et al.

    Mind the gaps: The evolution of regional earnings inequalities in the UK 1982–1997

    Journal of Regional Science

    (2002)

    • Cited by (0)

    1

    CNRS researcher also affiliated with Paris-Jourdan Sciences-Économiques and the Centre for Economic Policy Research.

    View full text
    Copyright © 2007 Elsevier Inc. All rights reserved.