Earnings, Unemployment and Britain's North‐south Divide: Real or Imaginary?†

Using cross-section data for 1983, the paper attempts to shed light on the extent of Britain's North-South divide. Hedonic wage equations corrected for selectivity bias have been estimated for both manual and nonmanual employees to assess whether they compete in spatially distinct labor markets. Differences in the mean and variance of earnings between the areas are decomposed into components that can be attributed either to structural or to characteristic differences. Finally, factors determining the probability of unemployment in the North and the South are examined and the degree of the labor-market flexibility assessed.