Spatial wage disparities and the role of spatial labor sorting

Spatial wage inequality among Chilean counties reached its peak in 1994, when it represented 19.2% of total wage inequality. By 2009, spatial inequality had decreased to 10.3%. However, when the model included controls on human capital, spatial inequality fell to 6%. This result implies that spatial labor sorting accounts for an average of about 45% of the spatial wage disparity. These findings suggest that policymakers should consider ways to spread human capital throughout the nation as an alternative to reduce spatial inequality.