People, places and earnings differentials in Scotland

an article by Patricia C. Melo (The James Hutton Institute, Aberdeen, Scotland) published in Regional Studies Volume 53 Issue 3 (March 2017)

Abstract

This paper investigates the contribution of ‘people’ and ‘place’ effects to earnings differentials in Scotland using individual and regional data. The main sources of differentials are attributed to workers’ characteristics (‘people’ effects), particularly academic and vocational qualifications, followed by occupational and industrial affiliations.

On the other hand, differences in the attributes of local area labour markets (‘place’ effects) explain only a small part of individual earnings differentials. The most relevant spatial attribute is local area human capital.

The findings suggest that people-based policies are likely to be more effective at improving workers’ earnings prospects than place-based policies.

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