July 2005

IZA DP No. 1664: Inter-Regional Wage Dispersion in Portugal

published in: Regional and Sectoral Economic Studies, 2006, 6 (1)

This paper examines the size o inter-regional wage dispersion in Portugal. For this purpose, we estimate a Mincer-type human capital wage equation, including controls for a large number of regions, and calculate a weighted and adjusted standard deviation (WASD) of inter-regional wage differentials. The value is high and quite stable over time. The highest wages are found in the region of Lisbon. Moreover, the results are quite sensitive to inclusion of human capital and industry controls. A decomposition analysis reveals that differences average years of education and in the return to education across regions account for a significant fraction of observed wage differentials.