THE ROLE OF EDUCATION IN RURAL-URBAN WAGE GAP FOR ROMANIA: A BLINDER-OAXACA DECOMPOSITION

Abstract

Education resides in schooling and training. In addition to knowledge and competences, the first contributes in acquiring a proper thinking and good behaviour. Training focuses on gaining the know-how for doing a specific task while schooling fails if it does not complement training and go beyond it. Both directions are relevant in order to tear down bricks in the wall of the rural-urban wage gaps. Nothing endures without education and as long as this is not consolidated in the rural environment, existing wage-gaps may continue to grow. Such an aspect will furthermore impact positively the migration phenomenon reducing its burden on the Romanian economy, as the low educated with a suitable training tend to migrate abroad or internally to urban areas in search of unqualified jobs with higher earnings. The current study aims to determine the drivers of the differences in earnings between rural and urban workers by using the Blinder-Oaxaca decomposition method. The results show that rural workers get paid less than their urban counterparts. Individual’s level of education has a positive effect on wages for both rural and urban workers. This also implies a greater positive effect for workers in urban environment. The results also indicate that an important part of wage inequality is explained by education. As a result, less and high educated workers from rural area will be rewarded relatively, on average, less than their counterparts from urban area.

Keywords

• educational achievements
• group inequality
• blinder-oaxaca decomposition