Abstract
The aim of this paper is the identification of the hourly wages heterogeneity in the sample of individuals living in 35 European metropolitan areas. Additionally, we evaluated factors which determine spatial variability. For this purpose, we applied Mincer-type multilevel models for the micro data from the European Social Survey (2010). To delimit metropolitan areas we used Urban Audit’s Larger Urban Zones. Our results suggest the greatest impact of cross-country differences in explaining metropolitan variation of wages. We confirmed the gender pay gap equal to 10-11%, the wage premium from permanent contracts (7-10%) and being responsible for supervising other workers (16%). The importance of workers and firms characteristics was proved both for individual-level and metro-level differences. It might suggests the part of inequalities between metropolises is connected with different composition of workers’ skills in each metropolis and spatial sorting. Finally, we found that unexplained (by such attributes) proportion of variability across metropolises might be the result of agglomeration effects. The positive impact of Jacobs externalities was found, while we did not confirm the existence of Marshall externalities.
Highlights
Due to the traditional view of the spatial equilibrium worker attributes and firm characteristics are indifferent in the space (Glaeser & Gottlieb, 2009)
This paper explored the spatial variability of wages across selected metropolitan areas in Europe
Our approach, based on using multilevel models, enables us to identify a few sources of spatial heterogeneity, widely discussed in the existing literature
Summary
Due to the traditional view of the spatial equilibrium worker attributes and firm characteristics are indifferent ( distributed) in the space (Glaeser & Gottlieb, 2009). Wages should be spatially homogenous, even if there are inequalities in the firm-level productivity and/or individual characteristics differences. This is the result of the same labour market composition. The existence of the spatial wage differences is possible, such imbalance disappears in the long time due to the labour mobility which causes the wage convergence. Several empirical studies investigate the average wages are unequal in space, after eliminating the individual and sectoral attributes. Such observations were provided both at the country Contextual factors like labour market institutions (i.e. minimal wage regulations or collective bargaining) have to be taken into account in the cross-country studies
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