Wage punishment and place of residence

Abstract

This article tests the hypothesis of wage punishment against workers living in poor counties. That is, we explicitly test the idea that workers living in poor counts receive a wage punishment in relation to similar skilled workers living in rich counties. The econometric results are robust to both a large set of explanatory variables and different econometric specifications. The 2 Stages and the 3 Stages Least Squares approach are used to correct both the endogeneity of the place of residence and the omission of the variable ability (ability bias). After all, the results suggest expressive wage punishment against workers that lived in poor areas. Furthermore, four alternative explanations for the correlation between wages and place of residence are tested and the results provide evidence in favor of i) a link between time spent commuting to workplace and productivity of the worker; and ii) statistical discrimination against workers that live in poor areas.