Alternative theories for explaining the spatial wage inequality: a multilevel competition among human capital, NEG and amenities

This paper presents an empirical framework for analyzing the spatial wage inequality in a Latin American country: Chile. This country is mainly characterized by two stylized facts: the high spatial concentration around metropolitan areas and the key role of natural resources. We consider both elements with a competition between NEG versus amenity framework. Both theories are combined with human capital through a Multilevel Analysis. The results show the low performance of NEG for Chile and how the natural resources are a winner causal mechanism for the case. Additionally, the spatial wage variability is extremely small when it is compared with the wage variation at individual level.