Agglomeration wage premium in Hungary – HETFA Working Paper Series No. 13.

The authors in this paper deal with the size and the causes of the wage differences among the urban and rural areas. The main question concerning the wage differences among cities and the countryside why the companies are present in large numbers in cities despite the higher wage costs. 

The most likely reason of this phenomena is that the labour productivity is higher in the urban areas, which stimulates businesses to continue their activities in the urban agglomerations. The more effective human resource recruitment, the more advantageous opportunities of learning and the exchange of experience are behind this process. Besides, due to the higher density of businesses in urban areas, the companies jointly are entitled to special services, which reduce their costs. According to the results of László Czaller and Klára Major, following the separation of regional labour supply and demand differences, in Hungary, the nominal wage difference is approx. 10% between city and countryside, however, the amount of the difference is significantly different in groups having different education.

Czaller, László & Major, Klára: Agglomeration wage premium in Hungary, 2015, HETFA Working Paper Series No. 13.