Industrial dynamics and regional wage disparities

Project deliverable 1.4

In this project we examine the relationship between the rise and decline of industries and the wage distribution at the regional scale. We did a study on NUTS-2 regions in Europe, for which we combined information from different data sources. Our preliminary results show that entry of industries is only associated with higher wages in regions if they are related to the existing industrial structure of the region. Exiting industries are associated with lower wages in regions in general, but exiting industries related to existing industries are linked to higher wages in regions. We also showed that European regions with a more related industrial structure are less likely to experience high intra-regional wage inequality across sectors. As the European study was not detailed in terms of sectors, regions and period, we also did a study on the Netherlands using micro-data, examining the relationship between industry dynamics and wage inequality for NUTS-3 regions in the period 2010-2019. Preliminary results show that entry of industries related to existing specializations of a region tends to reduce inequality in the region. We find no significant impact of exits of industries on regional inequality. The findings suggest that related diversification bring benefits to regions both in terms of smart and inclusive growth.