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Spatial Wage Differentials *

By Joachim Möller, Anette Haas, Universität Regensburg, D- Regensburg and E-mail Joachim


The paper analyzes the wage structure in Germany for different types of regions on the basis of panel micro data 1984-1997. Besides the spatial aspects we differentiate between two sectors of the economy (Manufacturing and Services), three skill groups and deciles of the wage distribution. After discussing alternative theoretical explanations for spatial wage differentials, we first present descriptive evidence by comparing the wage level in agglomerations and the rural periphery. According to our findings, an agglomeration differential does exist except for low-skilled service workers. A detailed econometric analysis based on a quantile regression approach corroborates this result. Observationally equivalent workers in agglomerations in general earn significantly more than their colleagues in rural areas. The agglomeration wage differential positively depends on the skill level. It tends to be higher in the manufacturing sector and to increase with the decile of the wage distribution. Our results indicate that a doubling of employment density leads to gross wage increase of 2.5 percent in the average. Theme: Regional labour market

Topics: Spatial wage structure, agglomeration wage differential, quantile regressions, skill premium JEL-Klassifikation, J31, R12
Year: 2011
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