About the research
This study aimed to provide evidence on the relative contribution of ‘people’ and ‘place’ effects to wage inequality in Britain. ‘People’ effects are the effects of an individual’s characteristics on wages that are not dependent on where the individual lives and works. ‘Place’ effects are the influence of a geographical area on an individual’s wage that does not depend on the characteristics of that individual.
The study used variance decomposition methods to find the relative contribution of people and place to individual wage inequality, estimating the share of overall wage inequality attributable to differences between labour markets and observing how this estimate is reduced with control for observable and unobservable characteristics of individual workers.