Behind the North-South divide: A decomposition analysis
The paper applies modified Oaxaca-type analyses on the eighteen available waves of the British Household Panel Survey to decompose the wage gap among full time employees from either side of the North-South divide and identify its components that can be attributed to measurable worker- and labour market characteristics, and the part due to differences in the returns to these endowments. Further, by applying Juhn, Murphy and Pierce’s (1991) methodology, it is analysed, how changes in these underlying factors could explain the one quarter decline in the wage gap over the 1991 – 2009 period. The paper confirms the existence of a differential treatment effect by showing that only one fifth of the wage gap can be explained by observable differences. The magnitude of the unexplainable coefficient effect is so large, that the remarkable improvements in Northern occupational structure and human capital levels over the period could only translate into an actual decline in the wage gap, because it coincided with a period of increasing inequality among Northern occupational wage premia, which – as a by-product – increased the average Northern wage and this way counterbalanced the effects of the increasing Southern returns to experience, that alone could have increased the initial pay gap by half.
|Date of creation:||12 Jan 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Gregg & Stephen Machin, 2000.
"Child Development and Success or Failure in the Youth Labor Market,"
in: Youth Employment and Joblessness in Advanced Countries, pages 247-288
National Bureau of Economic Research, Inc.
- Paul Gregg & Stephen Machin, 1998. "Child development and success or failure in the youth labour market," LSE Research Online Documents on Economics 20261, London School of Economics and Political Science, LSE Library.
- Paul Gregg & Stephen Machin, 1998. "Child Development and Success or Failure in the Youth Labour Market," CEP Discussion Papers dp0397, Centre for Economic Performance, LSE.
- Nickell, S. & Layard, R., 1997.
"Labour Market Institutions and Economic Performance,"
23, Centre for Economic Performance & Institute of Economics.
- Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
- Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
- John DiNardo & Nicole M. Fortin & Thomas Lemieux, 1995.
"Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach,"
NBER Working Papers
5093, National Bureau of Economic Research, Inc.
- DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-44, September.
- Nidardo, J. & Fortin, N. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Papers 93-94-15, California Irvine - School of Social Sciences.
- Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Cahiers de recherche 9406, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Dinardo, J. & Fortin, N.M. & Lemieux, T., 1994. "Labor Market Institutions and the Distribution of Wages, 1973-1992: a Semiparametric Approach," Cahiers de recherche 9406, Universite de Montreal, Departement de sciences economiques.
- Zhao Chen & Ming Lu & Guanghua Wan, 2010. "Inter-Industry Wage Differentials: An Increasingly Important Contributor to Urban China Income Inequality," Global COE Hi-Stat Discussion Paper Series gd09-130, Institute of Economic Research, Hitotsubashi University.
- F. L. Jones & Jonathan Kelley, 1984. "Decomposing Differences between Groups," Sociological Methods & Research, , vol. 12(3), pages 323-343, February.
- Scully, Gerald W, 1969. "Interstate Wage Differentials: A Cross Section Analysis," American Economic Review, American Economic Association, vol. 59(5), pages 757-73, December.
- 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).
- Vieira, José António Cabral & Couto, João Pedro Almeida & Borges Tiago, Maria Teresa, 2005. "Inter-Regional Wage Dispersion in Portugal," IZA Discussion Papers 1664, Institute for the Study of Labor (IZA).
- José António Cabral Vieira & João Pedro Almeida Couto & Maria Teresa Borges Tiago, 2005. "Inter-regional Wage Dispersion in Portugal," ERSA conference papers ersa05p160, European Regional Science Association.
- Becker, Gary S., 1971. "The Economics of Discrimination," University of Chicago Press Economics Books, University of Chicago Press, edition 2, number 9780226041162, June.
- Stephen Machin, 1995.
"Changes in the Relative Demand for Skills in the UK Labour Market,"
CEP Discussion Papers
dp0221, Centre for Economic Performance, LSE.
- Machin, Steve, 1994. "Changes in the Relative Demand for Skills in the UK Labour Market," CEPR Discussion Papers 952, C.E.P.R. Discussion Papers.
- Myeong-Su Yun, 2005.
"A Simple Solution to the Identification Problem in Detailed Wage Decompositions,"
Western Economic Association International, vol. 43(4), pages 766-772, October.
- Yun, Myeong-Su, 2003. "A Simple Solution to the Identification Problem in Detailed Wage Decompositions," IZA Discussion Papers 836, Institute for the Study of Labor (IZA).
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- Steve Machin & Anna Vignoles, 2004. "Educational inequality: the widening socio-economic gap," Fiscal Studies, Institute for Fiscal Studies, vol. 25(2), pages 107-128, June.
- Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
- Inmaculada Garcia & Jose Alberto Molina, 2002. "Inter-regional wage differentials in Spain," Applied Economics Letters, Taylor & Francis Journals, vol. 9(4), pages 209-215.
- Cotton, Jeremiah, 1988. "On the Decomposition of Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 236-43, May.
- Cameron, Samuel, 1985. "Inter-industry Variations in the Wage-Rates of Adult Male Manual Workers," Scottish Journal of Political Economy, Scottish Economic Society, vol. 32(3), pages 296-314, November.
- José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
- Ray Hudson, 1998. "Restructuring Region and State: the Case of North East England," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 89(1), pages 15-30, 02.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:28364. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.