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Spatial wage inequality in North America and Western Europe: changes between and within local labour markets 1975-2019

Author

Listed:
  • Bauluz, Luis
  • Bukowski, PaweÅ‚
  • Fransham, Mark
  • Lee, Annie
  • Lopez Forero, Margarita
  • Novokmet, Filip
  • Breau, Sebastien
  • Lee, Neil
  • Malgouyres, Clément
  • Schularick, Moritz
  • Verdugo, Gregory

Abstract

The rise of economic inequalities in advanced economies has been often linked with the growth of spatial inequalities within countries, yet there is limited comparative research that studies the relationship between national and subnational economic inequality. This paper presents the first systematic attempt to create internationally comparable evidence showing how different countries perform in terms of geographic wage inequalities. We create cross-country comparable measures of spatial wage disparities between and within similarly-defined local labour market areas (LLMAs) for Canada, France, (West) Germany, the UK and the US since the 1970s, and assess their contribution to national inequality. By the end of the 2010s, spatial inequalities in LLMA mean wages are similar in Canada, France, Germany and the UK; the US exhibits the highest degree of spatial inequality. Over the study period, spatial inequalities have nearly doubled in all countries, except for France where spatial inequalities have fallen back to 1970s levels. Due to a concomitant increase in within-place inequality, the contribution of places in explaining national wage inequality has remained fairly constant over the 40-year study period, except in the UK where we document a significant increase. Whilst common global social, economic and technological shocks are important drivers of spatial inequality, this variation in levels and trends of spatial inequality opens the way to comparative research exploring the role of national institutions in mediating how global shocks translate into economic disparities between places.

Suggested Citation

  • Bauluz, Luis & Bukowski, PaweÅ‚ & Fransham, Mark & Lee, Annie & Lopez Forero, Margarita & Novokmet, Filip & Breau, Sebastien & Lee, Neil & Malgouyres, Clément & Schularick, Moritz & Verdugo, Gregory, 2023. "Spatial wage inequality in North America and Western Europe: changes between and within local labour markets 1975-2019," CEPR Discussion Papers 18381, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18381
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    1. is not listed on IDEAS
    2. Lee, Neil & Fransham, Mark & Bukowski, Pawel, 2024. "Spatial labour market inequality and social protection in the UK," LSE Research Online Documents on Economics 122224, London School of Economics and Political Science, LSE Library.
    3. Demetrio Guzzardi & Salvatore Morelli, 2024. "A New Geography of Inequality: Top incomes in Italian Regions and Inner Areas," World Inequality Lab Working Papers halshs-04753481, HAL.
    4. Danilo Carullo & Paolo Di Caro & Ugo Fratesi, 2025. "The role of employment, labour productivity and trade linkages in the evolution of European regional disparities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 74(1), pages 1-30, March.
    5. Hong, Guangbin, 2024. "Two-sided sorting of workers and firms: Implications for spatial inequality and welfare," CLEF Working Paper Series 71, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    6. Harald Bathelt & Maximilian Buchholz & Michael Storper, 2024. "The nature, causes, and consequences of inter-regional inequality," Journal of Economic Geography, Oxford University Press, vol. 24(3), pages 353-374.
    7. Bathelt, Harald & Buchholz, Maximilian & Storper, Michael, 2024. "The nature, causes, and consequences of inter-regional inequality," LSE Research Online Documents on Economics 123014, London School of Economics and Political Science, LSE Library.

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    Keywords

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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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