2020 Volume 2019 Issue 23 Pages 1-23
This paper measures the effect of sorting on wage disparity. We extract worker skills by estimating the wage equation using Japanese individual data. We show that the skills of workers in metropolitan areas are 9.68% higher than the skills of workers in nonmetropolitan areas. In the counterfactual situation in which there is no migration (i.e., workers stay in their hometowns), the skill difference decreases to 5.56%. These results indicate that migration increases wage disparity by 22.0%. Thus, both hometown differences and migration behaviors are significant for wage disparities. Furthermore, features of migration sorting vary according to various worker characteristics
