Amenity Decomposition: The Role Played by Firms and Workers in Explaining Spatial Wage Differences in Chile

Abstract

It is well established in the literature that amenities are important in affecting regional patterns by influencing both workers' and firms' location decisions. Using the seminal contribution made by Beeson and Eberts, this study performs a wage change decomposition into amenity (workers) and productivity (firms) components. The results reveal that firms are more significant when explaining high average wage regions in Chile, since they derive more benefits from agglomeration economies and natural resources. Finally, the results also confirm how important agglomeration economies are in developing countries.