Wage disparities in Britain: people or place?

This paper investigates wage disparities across sub-national labour markets in Britain using anewly available microdata set. The findings show that wage disparity across areas is verypersistent over time. While area effects play a role in this wage disparity, most of it is due toindividual characteristics (sorting). Area effects contribute a very small percentage to theoverall variation of wages and so are not very important for understanding overall levels ofwage disparity. Specifically, in our preferred specification area effects explain less than 1of overall wage variation. This share has remained roughly constant over the period 1998-2008.