Measuring the sorting effect of migration on spatial wage disparities

Kentaro Nakajima and Ryosuke Okamoto
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Ryosuke Okamoto: National Graduate Institute for Policy Studies

No 14-19, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: Observed spatial wage disparities reflect not only disparities in regional productivity but also an uneven geographical distribution of heterogeneous worker skills. We measure spatial skill disparities in Japan and evaluate how migration contributes to these disparities. For this purpose, we regress the individual wage on the residential region dummy variables and a series of individual characteristics to decompose the wage into regional productivity and the workers’ skills. The estimation illustrates that by removing the skill heterogeneities, the productivity disparity is approximately half of the observed wage disparity. Workers living in metropolitan areas have 9.7% higher skills than those in nonmetropolitan areas on average. The spatial skill disparity that stems from individuals’ hometowns is approximately 4.2%. Hence, migration increases the spatial skill disparity from 4.2% to 9.7%, which is an increase of 5.5 percentage points. Furthermore, we investigate migration effects in terms of the workers’ characteristics and find that most sorting effects of migration come from highly educated and regularly employed male workers.

Pages: 25 pages
Date: 2014-10
New Economics Papers: this item is included in nep-geo, nep-lab, nep-mig and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ngi:dpaper:14-19

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