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Decomposition of Regional Wage Differences Along the Wage Distribution in Portugal: The Importance of Covariates

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  • Aurora Galego
  • João Pereira

Abstract

Unlike previous studies, in this paper we estimate the contribution of covariates for the regional wage decomposition components along the wage distribution employing a method first described in 2009 by S Firpo, N Fortin, and T Lemieu ( Econometrica 77 953–973). We consider the case of Portugal, a country with persistent and large regional wage gaps. We find that education, occupation, and firm size are the most important factors in explaining the growing importance of the composition effect. The wage structure effect, in turn, is mainly determined by differences in reward for experience and tenure. Moreover, we conclude that the importance of these covariates for both effects is not equal along the wage distribution.

Suggested Citation

  • Aurora Galego & João Pereira, 2014. "Decomposition of Regional Wage Differences Along the Wage Distribution in Portugal: The Importance of Covariates," Environment and Planning A, , vol. 46(10), pages 2514-2532, October.
    • Handle: RePEc:sae:envira:v:46:y:2014:i:10:p:2514-2532
    DOI: 10.1068/a130055p
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    More about this item

    Keywords

    regions; wage differentials; wage decompositions; unconditional quantile regression; recentred influence function;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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