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Real earnings disparities in Britain

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  • Gibbons, Stephen
  • Overman, Henry G.
  • Resende, Guilherme

Abstract

This report estimates housing-cost-earnings differentials across labour market areas in Britain. We show that quality-adjusted housing costs rise on average, one for one with the skill-adjusted earnings of the average working household. However, the relationship is Ushaped, with relatively high housing costs in places at the bottom and top ends of the wage distribution. This variation in housing costs means nominal wages are uninformative about real income disparities. If we assume spatial equilibrium and treat the cost-earnings differentials as estimates of the value of amenities, we can rank cities in terms of quality of life and estimate the value of different amenities. Our work improves on previous research by using longitudinal data on workers to estimate skill-adjusted labour market earnings differentials (net of taxes), using micro data on housing transactions, and by considering the implications of capital gains for housing user cost calculations.

Suggested Citation

  • Gibbons, Stephen & Overman, Henry G. & Resende, Guilherme, 2011. "Real earnings disparities in Britain," LSE Research Online Documents on Economics 33576, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:33576
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    File URL: http://eprints.lse.ac.uk/33576/
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    Cited by:

    1. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    2. Max Nathan & Anna Rosso, 2017. "Innovative events," Development Working Papers 429, Centro Studi Luca d'Agliano, University of Milano, revised 08 Apr 2019.
    3. Schlüter, Teresa, 2013. "Real wages, amenities and the adjustment of working hours across regional labour markets," LSE Research Online Documents on Economics 58529, London School of Economics and Political Science, LSE Library.
    4. Bernard Fingleton & Franz Fuerst & Nikodem Szumilo, 2019. "Housing affordability: Is new local supply the key?," Environment and Planning A, , vol. 51(1), pages 25-50, February.
    5. Stephen Gibbons & Susana Mourato & Guilherme Resende, 2014. "The Amenity Value of English Nature: A Hedonic Price Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(2), pages 175-196, February.
    6. ., 2014. "Urban economic performance," Chapters, in: Urban Economics and Urban Policy, chapter 2, pages 11-53, Edward Elgar Publishing.
    7. Christian A. L. Hilber, 2017. "The Economic Implications of House Price Capitalization: A Synthesis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 45(2), pages 301-339, April.
    8. Max Nathan, 2011. "Ethnic Inventors, Diversity and Innovation in the UK: Evidence from Patents Microdata," SERC Discussion Papers 0092, Centre for Economic Performance, LSE.
    9. Sevrin Waights, 2019. "The preservation of historic districts—is it worth it?," Journal of Economic Geography, Oxford University Press, vol. 19(2), pages 433-464.
    10. Hilber, Christian A. L., 2011. "The economics implications of house price capitalization a survey of an emerging literature," LSE Research Online Documents on Economics 58596, London School of Economics and Political Science, LSE Library.
    11. Gibbons, Stephen & Overman, Henry G., 2011. "The future of rural policy: lessons from spatial economics," LSE Research Online Documents on Economics 59234, London School of Economics and Political Science, LSE Library.
    12. Teresa Schlüter, 2013. "Real Wages, Amenities and the Adjustment of Working Hours Across Regional Labour Markets," SERC Discussion Papers 0130, Centre for Economic Performance, LSE.
    13. ., 2014. "Devolution, city governance and economic performance," Chapters, in: Urban Economics and Urban Policy, chapter 7, pages 157-184, Edward Elgar Publishing.
    14. Gutierrez-Posada, Diana & Kitsos, Tasos & Nathan, Max & Nuccio, Massimiliano, 2021. "Do Creative Industries Generate Multiplier Effects? Evidence from UK Cities, 1997-2018," SocArXiv xs8zg, Center for Open Science.
    15. ., 2014. "Urban policies," Chapters, in: Urban Economics and Urban Policy, chapter 8, pages 185-218, Edward Elgar Publishing.

    More about this item

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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