Regional Wage Differences and Agglomeration Externalities: Micro Evidence from Thai Manufacturing Workers

Nutchapon Prasertsoong and Nattapong Puttanapong
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Nutchapon Prasertsoong: Faculty of Economics, Thammasat University, Bangkok 10200, Thailand

Economies, 2022, vol. 10, issue 12, 1-22

Abstract: The large and persistent wage gap between the Bangkok Metropolitan Region and its peripheries remains a major concern for policymakers and civil society. Theoretically, these regional disparities exist due to differences in workforce skills and the local characteristics of the regions. This study empirically investigates the sources of spatial wage disparity in Thailand using data sets from the Labor Force Survey, the Industrial Census, geospatial data, and satellite imagery for the years 2007, 2012, and 2017. The two-stage estimation method was applied, and the soil clay content was used as the instrumental variable for correcting endogeneity and variable bias omission. The results show that workers’ education and experience affect the wage differential. Other than individual skills, workers also benefited from the agglomeration externalities of large cities. Specifically, the effect of agglomeration externalities on wages in Thailand was found to be statistically significant. To overcome the paradox of a low urbanization rate and high urban primacy in Thailand, this study suggests the establishment of multiple regional cities that create high agglomeration externalities.

Keywords: agglomeration economies; wage disparities; Thailand; productivity spillover; urbanization (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:10:y:2022:i:12:p:319-:d:1001046

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