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Spatial agglomeration is a central aspect of human life and of the geographic space in which most economic and social exchanges take place (Bairoch 1988). The size and shape of this geographic space have key implications for policy design, as they affect the regular patterns of mobility and interactions of people, goods, and ideas. This functional reality is weakly captured by the usual political-administrative units. Functional territories, as we call them in this study, represent a complex socio-spatial picture of overlapping markets between "areas or locational entities which have more interaction or connection with each other than with outside areas" (Brown and Holmes 1971, p 57), and with high frequency of economic and social interactions between their inhabitants, organizations, and firms (Berdegué et al. 2011).

The fly‐in/fly‐Out (FIFO) or, drive‐in/drive‐out (DIDO) labour system is a long‐distance commuting work arrangement to attract workers towards remote mineral or fossil fuel extraction areas, where they work in shifts and then return to their usual place of residence located in a different region. Along with more and cheaper transportation alternatives, the use of FIFO/DIDO systems have importantly increased in last decades around the world, which has translated to FIFO/DIDO systems operating even when already established cities are present in extractive regions. This paper uses the case of Chile, one of the most important mining countries in the world, to explore whether and in what extent these labor systems influence wage compensations. We find that FIFO/DIDO commuters obtain an average wage compensation of 2.4 per cent per commuted hour.

In this paper, we estimate the size of the wage premium necessary to compensate for remoteness incurred by workers compared to the city size productivity effects. We construct five urban hierarchy tiers for cities in Chile based on their level of remoteness from the urban system. We then contrast the effect generated by these variables on worker wages. We report a positive gradient of wages the higher the size of the urban tier and a loss in wages that can reach 35 percent for more remote cities.

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