Wage differences in Spain: an industry regional analysis

The present paper seeks to analyse regional and industry wage differentials in Spain. Differences in observed industry and regional earnings are to be expected, whenever the considered individuals differ with respect to their human capital characteristics. However, this paper shows, using data from Encuesta de Estructura Salarial (Structure of Earnings Survey), referring to 1995, that while controlling for these characteristics reduces the magnitude of derived industry-regional wage premia, they are insufficient to eliminate altogether. The results allow the authors to describe a dual wage determination system in Spain. That is to say, average hourly wage is closely related to cost of living in those industry-regions with a higher labour productivity and to labour productivity in those industry-regions with a lower level of value added per employee. This situation finds its institutional coverage in the collective bargaining system.