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Urban versus Rural Return to Human Capital in Portugal, A Cook-Book Recipe for Applying Assignment Models

Author

Listed:
  • Coen N. Teulings

    (SEO, University of Amsterdam)

  • José A.C. Vieira

    (University of Amsterdam and University of the Azores)

Abstract

The Portuguese economy has been characterised by modernisation sincethe post-war period. Lisbon and the Tagus Valley is a centre of thisprocess. Hence, this region faces a high demand for highly skilledlabour. This paper analyses rates of return on human capital in theregion of Lisbon and in the rest of the country in the period 1982-1992. An assignment model of heterogeneous workers to heterogeneousjobs is discussed. We also develop a cook-book recipe for itsestimation. The main implication, a high return being associated withsimilar workers being assigned to more complex jobs, is born out bythe data. Apparently new technology in Lisbon triggers the demand forhuman capital, not the other way around. The estimation procedureallows us to obtain a simple, free dimension, parameter that measuresthe heterogeneity in jobs and therefore the ease of substitutionbetween worker types. This is called the complexity dispersionparameter. Calculations suggest that paying half the optimal wagelevel is about to double the cost per efficiency unit of labour.

Suggested Citation

  • Coen N. Teulings & José A.C. Vieira, 1998. "Urban versus Rural Return to Human Capital in Portugal, A Cook-Book Recipe for Applying Assignment Models," Tinbergen Institute Discussion Papers 98-095/3, Tinbergen Institute, revised 20 Sep 2002.
    • Handle: RePEc:tin:wpaper:19980095
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, vol. 43(3), pages 455-468, May.
    4. 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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    2. Grinis, Inna, 2017. "Skills diversity in unity," LSE Research Online Documents on Economics 85125, London School of Economics and Political Science, LSE Library.
    3. 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).
    4. 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.

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