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We compare real wage differences between centralized and peripheral areas and highly centralized

and peripheral areas using vast information of German administrative data that contains more than

2.8 Mio individuals and 660,000 firms. We provide substantial empirical evidence that most of the

wage gaps can be explained by differences in endowments of individual and firm characteristics,

particularly when unobserved individual and firm heterogeneity is appropriately accounted for. Our

interpretation is that the selectivity of workers and firms in space explains most of the real wage gap

between peripheral and (highly) centralized regions, and returns to characteristics are honoured rather

equally in all regional types.

 

(Quelle: Abstract)