Wage inequality, entrepreneurship and creative people in regional labour markets

We examine the impact of entrepreneurship and creative occupations on wage inequality in regional labour markets. We apply dynamic models to longitudinal linked employer-employee data for Portugal. Our results indicate that regional labour markets where job creation by new firms is stronger and creative occupations represent a greater proportion of total employment are associated with greater inequality. The wage structures of new firms are less compressed than those of incumbents. New firms pay lower average wages but offer a greater share of high-paying jobs. Opportunity-based entrepreneurship and creative occupations are linked to a higher share of top earners.