Income Inequality as a Result of the Different Sectoral Structure at the Local Level

Abstract

Long-term income differences between regions are undesirable from an economic and social point of view. Nevertheless, they are a long-term phenomenon in many countries. Although comparing the countries with each other, the situation appears to be similar. The assumption of reducing the differences in the size of household income is to identify objectively the determinants of wages. According to published opinions, the difference in labor income is due to the different value of the marginal product of labor and thus the resulting wage. Alternative views associate wage size with market factors - the labor market situation, the overall wealth of households, the location of the region, the increase or dampening of the economic activity of the system. The aim of this paper is to analyze and quantify the influence of different branch structure on the regional nominal wage. The model change estimates the possible change in the regional wage caused by the change in the representation of individual sectors in the regions of Slovakia. The factors considered for regional disparities are the representation of the manufacturing sector, sectoral labor productivity and labor market participation.