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Urban Versus Rural Return to Human Capital in Portugal: A Cookbook Recipe for Applying Assignment Models

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  • C. N. Teulings
  • J. A. C. Vieira

Abstract

. The Portuguese economy has been characterized by modernization since the post‐war period, and Lisbon is a centre of this process. This paper analyses rates of return on human capital in Lisbon versus the rest of the country in the period 1982–92. An assignment model of heterogeneous workers to heterogeneous jobs is applied. We introduce the concept of the complexity dispersion parameter, which measures job heterogeneity and the ease of substitution between worker types. It is free dimension and can be compared across countries. We also develop a cookbook recipe for the estimation of this parameter. The main implication of the model — a high return to human capital is associated with similar workers being assigned to more complex jobs — is confirmed by the data. The complexity dispersion parameter suggests that paying half of the optimal wage level at least doubles the cost per efficiency unit of labour.

Suggested Citation

  • C. N. Teulings & J. A. C. Vieira, 2004. "Urban Versus Rural Return to Human Capital in Portugal: A Cookbook Recipe for Applying Assignment Models," LABOUR, CEIS, vol. 18(2), pages 265-291, June.
    • Handle: RePEc:bla:labour:v:18:y:2004:i:2:p:265-291
    DOI: 10.1111/j.1121-7081.2004.00267.x
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    References listed on IDEAS

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    1. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-229, April.
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    3. Kahn, Shulamit & Lang, Kevin, 1988. "Efficient Estimation of Structural Hedonic Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 157-166, February.
    4. Teulings, Coen N, 1995. "The Wage Distribution in a Model of the Assignment of Skills to Jobs," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 280-315, April.
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    Cited by:

    1. Jose Antonio Cabral Vieira & Joao Pedro Couto & Maria Teresa Tiago, 2006. "Regional Differences in Returns to Education in Portugal," ERSA conference papers ersa06p44, European Regional Science Association.
    2. Vieira, J.A.C. & Couto, J.P.A. & Tiago, M.T.B., 2006. "Inter-regional Wage Dispersion in Portugal," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 6(1).
    3. Grinis, Inna, 2017. "Skills diversity in unity," LSE Research Online Documents on Economics 85125, London School of Economics and Political Science, LSE Library.

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