engleski

Sources of spatial differences in wages: Analysis for the region of Croatia

Regional inequalities are a striking and persisitent feature of many economies, developed and less developed. One of the most important indicators of the inequalities is regional wage level. This paper uses NUTS3 sub-regional data for Croatia to investigate the sources of the regional wages differences in Croatia. The literature recognizes several determinants of spatial differences in wages ; productivity, occupational composition and non-human endowments. We try to follow the more recent literature which shows that a non-human endowment does not have significant role in the explanation of these inequalities. Thus we drive our attention to other two sources and decompose the spatial variation of wages into productivity effect and occupational composition effect. During the process of decomposition we use a model that will take into consideration the fact that these two indices are positively correlated. Regarding the existing of the several papers that fully investigate sources of the productivity we pay particular attention to the role of occupational composition effect, mainly exploring how the spatial variance in wages is attributable to variations in occupational composition effect. Such decomposition gain attention in the light of exploring a new role of government and institutions in economic policy making, taking into account different paths of influence of government and public institutions on productivity and on occupational composition. Later is particularly emphasized in the last step of our work in which we examine the relationship between the occupational composition and the proximity to economic mass instrumented by different measures of urbanization in the NUTS3 sub-regions. Abovementioned should be observed not only as a possible new set of instruments for cohesion policy in Croatia but also as an important instrument for other countries in the process of achieving higher levels of efficiency in public sector. Namely, the issue of efficiency in public sector is recognized in the light of the recent economic crisis as one of the most important.

CROATIA; ECONOMIC MASS; OCCUPATIONAL COMPOSITITON INDEX; WAGES

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