Area disparities in Britain: understanding the contribution of people vs. place through variance decompositions

Gibbons, Stephen, Overman, Henry G and Pelkonen, Panu (2014) Area disparities in Britain: understanding the contribution of people vs. place through variance decompositions. Oxford Bulletin of Economics and Statistics, 76 (5). pp. 745-763. ISSN 0305-9049

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Abstract

This article considers methods for decomposing wage variation into individual and group specific components. We discuss the merits of these methods, which are applicable to variance decomposition problems generally. The relative magnitudes of the measures depend on the underlying variances and covariances, and we discuss how to interpret them, and how they might relate to structural parameters of interest. We show that a clear-cut division of variation into area and individual components is impossible. An empirical application to the British labour market demonstrates that labour market area effects contribute very little to the overall variation of wages in Britain.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Depositing User: Panu Pelkonen
Date Deposited: 10 Mar 2016 12:20
Last Modified: 15 Mar 2017 17:12
URI: http://sro.sussex.ac.uk/id/eprint/59970

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