Spatial Industrial Wage Structure: A Cross-Country Study

The purpose of this paper is to investigate the factors affecting the wage gap between Iran and selected developing countries using a new economic geography models. A panel data approach is employed using the data for 16 selected developing countries during the period 1998-2007. The sample countries are members of WTO. Based on the results obtained in this study, the new economic geography model provides a suitable explanation for the spatial structure of wage in Iran. More specifically, market size and distance-weighted have a positive relationship with wages while prices of non-trade goods have a negative effect on spatial structure of wage. Therefore, in determining wage levels rather than the characteristics of labor or labor productivity and the conditions governing the labor market are effective. Based on the findings of this paper, it is expected to pay special attention to benefit from the agglomeration and its effects on wages in the economic development programs in selected developing countries.