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Real Earnings Disparities in Britain

Author

Listed:
  • Stephen Gibbons
  • Henry G. Overman
  • Guilherme Resende

Abstract

This report estimates housing-cost-earnings differentials across labour market areas in Britain. We show that quality-adjusted housing costs rise on average, one for one with the skill-adjusted earnings of the average working household. However, the relationship is Ushaped, with relatively high housing costs in places at the bottom and top ends of the wage distribution. This variation in housing costs means nominal wages are uninformative about real income disparities. If we assume spatial equilibrium and treat the cost-earnings differentials as estimates of the value of amenities, we can rank cities in terms of quality of life and estimate the value of different amenities. Our work improves on previous research by using longitudinal data on workers to estimate skill-adjusted labour market earnings differentials (net of taxes), using micro data on housing transactions, and by considering the implications of capital gains for housing user cost calculations.

Suggested Citation

  • Stephen Gibbons & Henry G. Overman & Guilherme Resende, 2011. "Real Earnings Disparities in Britain," SERC Discussion Papers 0065, Spatial Economics Research Centre, LSE.
  • Handle: RePEc:cep:sercdp:0065
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    Cited by:

    1. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, Elsevier.
    2. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    3. Schlüter, Teresa, 2013. "Real wages, amenities and the adjustment of working hours across regional labour markets," LSE Research Online Documents on Economics 58529, London School of Economics and Political Science, LSE Library.
    4. Nathan, Max, 2011. "Ethnic inventors, diversity and innovation in the UK: evidence from patents microdata," LSE Research Online Documents on Economics 58329, London School of Economics and Political Science, LSE Library.
    5. ., 2014. "Urban economic performance," Chapters,in: Urban Economics and Urban Policy, chapter 2, pages 11-53 Edward Elgar Publishing.
    6. Hilber, Christian A. L., 2011. "The economics implications of house price capitalization a survey of an emerging literature," LSE Research Online Documents on Economics 58596, London School of Economics and Political Science, LSE Library.
    7. Gibbons, Steve & Overman, Henry G., 2011. "The future of rural policy: lessons from spatial economics," LSE Research Online Documents on Economics 59234, London School of Economics and Political Science, LSE Library.
    8. Teresa Schlüter, 2013. "Real Wages, Amenities and the Adjustment of Working Hours Across Regional Labour Markets," SERC Discussion Papers 0130, Spatial Economics Research Centre, LSE.
    9. ., 2014. "Devolution, city governance and economic performance," Chapters,in: Urban Economics and Urban Policy, chapter 7, pages 157-184 Edward Elgar Publishing.
    10. ., 2014. "Urban policies," Chapters,in: Urban Economics and Urban Policy, chapter 8, pages 185-218 Edward Elgar Publishing.

    More about this item

    Keywords

    Britain; spatial equilibrium; labour market; housing market;

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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