Oct 29, 2014 Report No：14-19
Measuring the sorting effect of migration on spatial wage disparities
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.
|Keywords||sorting; migration; spatial wage disparities; skill difference by residence; skill difference by hometown|