Rural - urban income gap and labour market in Romania

Abstract

Rural – urban income gap is an important social-economic development indicator for a society. A large rural - urban income gap within a society reveals a split of it into two distinct societies, one extremely poor compared to the other. In Romania, almost half of the resident population lives in rural areas (46.02% in 2019), while the urban-rural migration flow is higher than the traditional reverse flow since 1997. However, the country is characterized by regional economic disparities, Bucharest-Ilfov region being the most economically developed. Labour market in rural areas is underdeveloped, rural population being highly depended on subsistence agriculture. Furthermore, rural areas have a low level of income and living standards. In this paper, we analysis the rural-urban labour market dynamics and rural-urban income gap using a LMDI (logarithmic mean Divisia index) decomposition for 2005-2019 period. Factors such as income gap effect and structural rural income effect are considered. Results show that the total urban–rural income gap has decreased with 8.91%, while structural rural income effect contributed with an increase of only 0.63%, the income gap effect (of different employed population groups) being of -9.49%.