Regional Wage Differentials Research Articles

Wages, Rents and Heterogeneous Moving Costs (Second Version)

The model of compensating differentials in regional labor and land markets was formalized by Roback (1982). The model interprets regional differences in constant quality wages and rents as compensating firms and residents for inter-regional differences in amenities. While the model assumes that the costs of relocating to a new city are zero, the results hold in the presence of moving costs for the marginal migrant. This paper extends the Roback model to allow for moving costs which vary among a city's residents and businesses. This modification of the model generates new interpretations of regional differences in rents and wages. The theoretical results suggests that the interpretation of inter-city rent and wage differentials as compensating is misguided, that such differentials are inappropriate as weights in QOL comparisons and stresses the importance of local housing and labor market parameters in the determination of these differentials. The importance of amenities is retained, but housing supply becomes the main other determinant of regional rents. Housing supply was ignored in the literature following on Roback's initial insight. The new perspective also provides a bridge between the neoclassical perspective implicit in Roback's approach and the newer literature on agglomeration economies.

Regional Wage Differentiation and Wage Bargaining Systems in the EU

The theoretical literature has argued that a centralized wage bargaining system may result in low regional wage differentiation and high regional unemployment differentials. The empirical literature has found that centralized wage bargaining leads to lower wage inequality for different skills, industries and population groups, but has not investigated its impact on regional wage differentiation. Empirical evidence in this paper for EU regions for the period 1980-2000 suggests that countries with more coordinated wage bargaining systems have lower regional wage differentials, after controlling for regional productivity and unemployment differentials.

The Regional Dimension of Collective Wage Bargaining: The Case of Belgium

The potential failure of national industry agreements to take into account productivity levels of least productive regions has been considered as one of the causes of regional unemployment in European countries. Two solutions are generally proposed: the first, encouraged by the European commission and the OECD, consists in decentralising wage bargaining to the firm. The second solution, the regionalisation of wage bargaining, is frequently mentioned in Belgium or in Italy where regional unemployment differentials are high. The objective of this paper is to verify if the Belgian wage setting system, where industry bargaining has a national scope, indeed prevents regional productivity levels to be taken into account in wage formation. Using a very rich linked employer-employee dataset which provides detailed information on wages, productivity, and worker's and firm's characteristics, we find that regional wage differentials and regional productivity differentials within joint committees are positively correlated. Moreover, this relation is stronger (i) for joint committees where firm-level bargaining is relatively frequent and (ii) for joint committees already sub-divided along a local line. We conclude that the current Belgian wage setting system (which combines interprofessional, industry and firm level bargaining) already includes mechanisms that allow regional productivity to be taken into account.

Globalization, regional wage differentials and the Stolper–Samuelson Theorem: Evidence from Mexico

In this paper, I study what factors determined the changes in Mexico's regional wage differentials during the nineties. I exploit the regional variation in exposure to international markets to identify the effects of NAFTA on wages and the skill premium. The results support the presence of Stolper–Samuelson type of responses during Mexico's trade liberalization: regions more exposed to globalization appear to have exhibited an increase in overall wage levels, but a decrease in the skill premium, relative to other regions of the country. The results suggest that trade liberalization has a spatial dimension that is usually neglected in traditional models.

Public Sector Pay Bargaining and Regional Labour Markets: Regional Pay Differentials for Women Working as Nurses within the UK National Health Service

Spoor C. and Sutherland J. (2007) Public sector pay bargaining and regional labour markets: regional pay differentials for women working as nurses within the UK National Health Service, Regional Studies 41, 115–129. The policy context of this paper is the controversy over pay bargaining processes and the advantages claimed for decentralized pay bargaining as opposed to centralized bargaining for nurses, the single most important occupational grouping within the UK National Health Service and conventionally associated with a problem of labour shortages. Making use of a pooled, cross-section data set from eight successive sweeps of the Labour Force Survey, which consists of women who possess a nursing qualification, this paper examines regional wage differentials from two perspectives. First, regional wage differentials accruing to women employed as nurses within the National Health Service are examined. These differentials are seen to be sizeable, evidence compatible with an existing degree of localization...

Collective bargaining and regional wage differences in Spain: an empirical analysis

This article analyses the importance of labour market institutions and, in particular, collective wage bargaining in shaping regional wage differences in the Spanish labour market. Using microdata from the Spanish Structure of Earnings Survey, our results reveal that there are significant inter-regional wage differences for similarly skilled workers. These differences are present throughout the whole wage structure and can be explained by both competitive and non-competitive factors, such as insufficient competition in product markets. In this context, industry-level collective bargaining plays a major role in accounting for regional wage differences, a role that in the Spanish case is enhanced due to its unusual regional dimension.

The Economic Performance of Regions

P ORTER M. E. (2003) The economic performance of regions, Reg. Studies 37 , 549-578. This paper examines the basic facts about the regional economic performance, the composition of regional economies and the role of clusters in the US economy over period of 1990 to 2000. The performance of regional economies varies markedly in terms of wage, wage growth, employment growth and patenting rate. Based on the distribution of economic activity across geography, we classify US industries into traded, local and resource-dependent. Traded industries account for only about one-third of employment but register much higher wages, far higher rates of innovation and influence local wages. We delineate clusters of traded industries using co-location patterns across US regions. The mix of clusters differs markedly across regions. The performance of regional economies is strongly influenced by the strength of local clusters and the vitality and plurality of innovation. Regional wage differences are dominated by the relative performance of the region in the clusters in which it has positions, with the particular mix of clusters secondary. A series of regional policy implications emerge from the findings. P ORTER M. E. (2003) La performance économique des regions, Reg. Studies 37 , 549-578. Cet article cherche à examiner les principes fondamentaux de la performance économique régionale, de la structure des économies régionales, et du rôle des groupements dans l'économie des Etats-Unis de 1990 à 2000. La performance des économies régionales varie sensiblement du point de vue des salaires, de la croissance des salaires, de la hausse de l'emploi, et du nombre des brevets. A partir de la répartition de l'activité économique géographique, on classe les entreprises industrielles aux Etats-Unis sous les rubriques commerciale, locale, et dépendante des ressources. Les entreprises industrielles à vocation commerciale n'expliquent qu'un tiers de l' emploi mais laissent voir des salaires nettement plus élevés, des taux d'innovation bien plus importants, et influent sur les salaires locaux. Employant des distributions de localisations partagées à travers les Etats-Unis, on délimite des groupements d'entreprises industrielles à vocation commerciale. La structure des groupements varie sensiblement suivant la région. La performance des économies régionales est fortement influencé par la force des groupements locaux et par la vitalité et par la pluralité de l'innovation. Les écarts des salaires réels s'expliquent primordialement par la performance relative de la région quant aux groupements où elle est pré sente, la structure particulière des groupements n'étant que d'une importance secondaire. Il en résulte toute une série d'implications pour la politique. P ORTER M. E. (2000) Die wirtschaftliche Leistungskraft von Regionen, Reg. Studies 37 , 549-578. Dieser Beitrag analysiert Kerndaten regionaler Wirtschaftsräume in den Vereinigten Staaten, insbesondere ihre wirtschaftliche Leistungskraft, ihre Zusammensetzung und die Rolle regionaler Cluster. Die Regionen der Vereinigten Staaten unterschieden sich in den Jahren 1990 bis 2000 deutlich in ihrer wirtschaftlichen Leistungskraft gemessen an Lohnniveau und - wachstum, Beschäftigungsentwicklung, und Patentrate. Basierend auf der geographischen Konzentration öknomischer Aktitivtät klassifizieren wir Industriezweige als überregional ("traded'), lokal oder abhängig von der Präsenz von Naturschä tzen. Cluster überregionaler Industrien beschäftigen nur circa ein Drittel aller Erwerbstätigen, verzeichnen aber überdurchschnittliche Lö hne und signifikant höhere Innovationsraten als die Gesamtwirtschaft. Die relative Bedeutung einzelner Cluster innerhalb der Gruppe überregionaler Industrien unterscheidet sich deutlich im regionalen Vergleich. Der wirtschaftliche Erfolg einer Region wird stark von der relative Leistungskraft und Innovationsstärke der dort angesiedelten überregionalen Cluster beeinflusst. So hat das relative Lohnniveau in den überregionalen Clustern in einer Region einen dominanten Einfluss auf das regionale Lohnniveau, während die spezifische Identität dieser Cluster nur eine sekundäre Rolle spielt. Der Beitrag entwickelt aus dieser Analyse eine Reihe von Implikationen für die Wirtschaftspolitik.

Economic Integration and Regional Income Inequalities: Competing Dynamics of Regional Wages and Innovative Capabilities

AbstractA factor‐price difference scenario has recently been used by Krugman and Venables and by Puga to explain why, in the absence of labor migrations, economic integration should first produce and then dissolve regional income inequalities. The authors question this scenario in a dynamic analysis framework that extends the Baldwin, Martin, and Ottaviano ones to allow for regional wage differences. In this context, wage flexibility is no more a sufficient condition to induce long‐run convergence. Indeed, when regions are equally sized, the innovative capability advantage of the “core” outweighs the wage cost advantage of the “periphery” even for very low transport costs, and regional wage gaps are likely to persist in the long run.

Regional Efficiency Wages: Are They a Source of Real Earnings Differentials?

This paper investigates the role of spatial efficiency wage premiums as a partial explanation for both inter‐industry and geographic wage differentials. The empirical approach is based on an analysis of panel data for six select manufacturing industries operating within specific (U.S.) states. Besides testing for the existence of a regional “wage curve,” this research adds to the evidence on traditional determinants of spatial wage differentials. An explicit treatment of regional cost‐of‐living conditions is unique to the analysis; also, industry wage structures are accounted for in explaining regional wage differences. The findings here contribute to an initial body of evidence on regional efficiency wages. The empirical evidence indicates that the relationship between regional wages (nominal or real) and the local unemployment rate is much more complex than implied by the wage curve.

Public Service Employment and the Public– Private Wage Differential in British Regions

Successive forms of regional policy in the UK have sought to support the maintenance and creation of public sector employment opportunities in relatively disadvantaged regions. Nationally negotiated public sector pay rates mean that the private-public pay gap is likely to be wider in lower demand regions. This will be reinforced by the relative absence of private sector employment crowding-out in such higher unemployment regions. This paper investigates the association between private and public sector service employment using panel data for British regions, and estimates regional public-private wage differentials using British Household Panel Survey data for 1991 to 1996. Across Britain, private sector employment growth is weakly positively associated with higher public service employment growth, but the association is stronger in Scotland and the North of England. The pattern of regional wage differentials found is consistent with lower crowding-out in higher unemployment regions. This suggests that reg...

Spatial Routes to Gender Wage (In)equality: Regional Restructuring and Wage Differentials by Gender and Education

I examine how different dimensions of restructuring are related to gender wage inequality. The analysis extends research on regional wage differentials to include differentials between men and women in two educational groups at opposite ends of the educational hierarchy. Relative wages across regional labor markets in the United States are modeled in a multilevel framework as outcomes of variation in economic conditions associated with restructuring. Using microdata from the 1990 PUMS-A 5 percent census files, as well as independent sources of macro-data on counties, I show that the direction of wage changes associated with each dimension of restructuring generally does not differ by gender or education. Wages are either higher or lower than the average labor market for all groups. However, there are significant differences in relative wages by gender and many important differences between the two educational groups in the spatial distribution of gender wage inequality. Several “spatial routes” to gender wage equality emerge that differ from the dominant temporal explanations of the declining gender wage gap and differ according to the educational background of workers.

Wage Dynamics in Urban Brazil: Evidence of Regional Segmentation or National Markets?

In spite of Brazil's rapid pace of economic integration in recent decades, there remains substantial evidence of regional differences in wages. Numerous studies have also cited the impact of the country's form of economic development on various skill and occupational categories. On the other hand, macroeconomic models generally simplify labor market processes by assuming a single homogeneous national labor market. Arc wages in Brazil, then, determined by isolated regional, occupational, or nationwide factors? This study develops an econometric model for decomposing annual wage changes into national, occupational, and regional effects and applies it to data on male employees in Brazil's major urban areas to test whether the annual wage changes are more similar among occupational or local categories. It shows that wages are affected both by local conditions and national occupational trends, and furthermore that the underlying patterns of regional and occupational wage differentials are quite stable.

Amenities and regional differences in returns to worker characteristics

Average wages in regions in the United States vary considerably. In trying to explain these differences in the average wage across regions a number of studies have found that differences in the returns to characteristics of workers, such as years of schooling, are as important as differences in the skill composition of the labor force [4, 6, 10, 141. These differences in returns are generally interpreted as reflecting regional differences in demand for worker characteristics coupled with barriers to factor mobility. This interpretation is based on the argument that “the presence of at least one perfectly mobile factor, with perfect information will cause spatial convergence in characteristic prices, as that particular factor exploits any spatial price differential” [4, p. 2161. This paper suggests an alternative to this demand-based explanation for regional differences in the structure of wages, one based on regional differences in the supply of worker characteristics.’ This explanation does not rely on impediments to the movement of workers or firms and is consistent with an equilibrium view of wages in which regional wage differentials are viewed as compensation for local amenities. The theoretical model, presented in the following section, assumes capital and labor are perfectly mobile, with perfect information implying that in equilibrium the utility of workers with similar characteristics is the same in all locations. This convergence of utility, however, does not necessarily imply convergence of characteristic prices. Equilibrium differences in the returns to a specific worker characteristic can exist if worker characteristics affect an individual’s valuation of an area’s amenities relative to the individual’s demand for land.

Modern rice technology and regional wage differentials in the Philippines

ABSTRACTFear has been widely expressed that the modern rice varieties have created large disparities in regional income distribution, as the productivity gap between favorable and unfavorable rice‐production environments widened due to differential technology adoption throughout South and Southeast Asia over the last two decades.Technology affects the income of farm population directly through its effects on productivity and factor use, and indirectly through its effect on factor prices. In particular, the ultimate distributional impact of modern varieties will critically depend on the interregional labor‐market adjustments through migration in response to regional wage differentials created by the differential technology adoption, since labor is the main resource of the majority of the rural population.We studied favorable and unfavorable rice‐growing villages in the Philippines, and found that adoption of modern varieties during the 1970s was positively related to population growth rate. Contrary to popular belief, no association was observed between wage rates and adoption of modern varieties as of 1986. These findings support the hypothesis that the differential adoption of modern rice varieties induced interregional labor migration toward equalization of wage income across different production environments.

Modern rice technology and regional wage differentials in the Philippines

Fear has been widely expressed that the modern rice varieties have created large disparities in regional income distribution, as the productivity gap between favorable and unfavorable rice-production environments widened due to differential technology adoption throughout South and Southeast Asia over the last two decades. Technology affects the income of farm population directly through its effects on productivity and factor use, and indirectly through its effect on factor prices. In particular, the ultimate distributional impact of modern varieties will critically depend on the interregional labor-market adjustments through migration in response to regional wage differentials created by the differential technology adoption, since labor is the main resource of the majority of the rural population. We studied favorable and unfavorable rice-growing villages in the Philippines, and found that adoption of modern varieties during the 1970s was positively related to population growth rate. Contrary to popular belief, no association was observed between wage rates and adoption of modern varieties as of 1986. These findings support the hypothesis that the differential adoption of modern rice varieties induced interregional labor migration toward equalization of wage income across different production environments.

Regional Wage Differentials and the Spatial Convergence of Worker Characteristic Prices

This paper provides a test for variation in wage structures across regions. The authors suggest that the appropriate test for structural variation incorporates a combination of two lines of research: structural variation and compensating variation. The model of earnings determination used implies that, while job characteristic prices may be subject to stochastic shocks or industry-specific factors and, hence, may differ between regions, the returns to human capital characteristics will be regionally invariant. The results suggest that the theoretical expectations of regional homogeneity is generally supported for the decade of the 1970s. Copyright 1989 by MIT Press.

Prior Geographic Mobility and Job Search Length

The effect of previous geographic mobility on the length of an unemployed person's job search in the United States is examined. "This study proposed that knowledge of regional wage differentials and other market conditions give a worker with prior geographic mobility experience a better stock of information than one who has worked all of his or her work life in the same geographical location. It is proposed that this superior stock of information has a significant impact on the amount of time it takes an unemployed worker to locate and accept a job." Data are from the 1981 Panel Study of Income Dynamics.

Accounting for South/Non-South Real Wage Differentials and for Changes in Those Differentials over Time

A unified accounting framework for analyzing differences in real wages between the South and non-South in 1979 and for changes in South/non-South wage ratios between 1973 and 1979 is outlined. Cross-section analysis of real wage differentials allows two sources of regional wage variation: (1) worker and job characteristics; and (2) returns to those characteristics. Our results suggest that differences in the latter may be as important in accounting for regional wage differentials as the former. An interactive specification permits decomposition of changes in regional wage ratios into direct effects of changes in characteristics and indirect effects of region, year, and region-year variations in returns. More than half the predicted changes in South/non-South wage ratios can be accounted for by changing relative returns to characteristics between the South and non-South.

A Retrospective View of Technological and Other Changes in Philippine Rice Farming, 1965-1982

Previous articleNext article No AccessA Retrospective View of Technological and Other Changes in Philippine Rice Farming, 1965-1982Robert W. HerdtRobert W. Herdt Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Economic Development and Cultural Change Volume 35, Number 2Jan., 1987 Article DOIhttps://doi.org/10.1086/451588 Views: 7Total views on this site Citations: 26Citations are reported from Crossref Copyright 1987 The University of ChicagoPDF download Crossref reports the following articles citing this article:Zhaoqiang Zhong, Benhong Peng Multi-agent behavior strategy game and evolutionary simulation analysis under environmental regulation, Energy & Environment 37 (Sep 2022): 0958305X2211251.https://doi.org/10.1177/0958305X221125126Weiqing Li, Huaping Sun, Dang Khoa Tran, Farhad Taghizadeh-Hesary The Impact of Environmental Regulation on Technological Innovation of Resource-Based Industries, Sustainability 12, no.1717 (Aug 2020): 6837.https://doi.org/10.3390/su12176837Jonathan Harwood Could the adverse consequences of the green revolution have been foreseen? 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Industrialization and Regional Inequality: Wages in Britain, 1760–1914

This paper describes the geographical pattern of wages in Britain between 1760 and 1914. It then draws out some of the implications of the wages pattern and considers, in particular, the implications for the “growth pole” debate on the likely effect of industrialization upon regional income inequalities. The market forces responsible for creating and maintaining these differentials are then described, followed by a final section which discsusses the significance of changing regional wage differentials to the standar-of-living debate. It concludes that from a regional perspective the overall effects of industrialization upon living standards are indisputably favorable.