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Ability sorting and consumer city

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  • Lee, Sanghoon

Abstract

This paper provides a consumption-side explanation for the urban wage premium. The paper shows that if the taste for consumption variety is a luxury good, high average wages in large cities can be due to the selection of high-skill workers choosing to live there. A unique implication is that urban wage premiums are decreasing in skills and can even be negative for very high-skill workers. I confirm this implication using data on the health care workers.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 68 (2010)
Issue (Month): 1 (July)
Pages: 20-33

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Handle: RePEc:eee:juecon:v:68:y:2010:i:1:p:20-33

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Urban wage premium Ability sorting Consumption variety Productivity spillover Agglomeration economies Housing price;

References

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  1. Wheeler, Christopher H., 2006. "Cities and the growth of wages among young workers: Evidence from the NLSY," Journal of Urban Economics, Elsevier, vol. 60(2), pages 162-184, September.
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  8. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004. "Spatial Wage Disparities: Sorting Matters!," CEPR Discussion Papers 4240, C.E.P.R. Discussion Papers.
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  13. Rosenthal, Stuart S. & Strange, William C., 2008. "The attenuation of human capital spillovers," Journal of Urban Economics, Elsevier, vol. 64(2), pages 373-389, September.
  14. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
  15. Glaeser, Edward L. & Kahn, Matthew E. & Rappaport, Jordan, 2008. "Why do the poor live in cities The role of public transportation," Journal of Urban Economics, Elsevier, vol. 63(1), pages 1-24, January.
  16. Janice Compton & Robert A. Pollak, 2007. "Why Are Power Couples Increasingly Concentrated in Large Metropolitan Areas?," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 475-512.
  17. Tabuchi, Takatoshi & Yoshida, Atsushi, 2000. "Separating Urban Agglomeration Economies in Consumption and Production," Journal of Urban Economics, Elsevier, vol. 48(1), pages 70-84, July.
  18. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
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  21. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-99, November.
  2. Helsley, Robert W. & Strange, William C., 2011. "Entrepreneurs and cities: Complexity, thickness and balance," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 550-559.
  3. Kristian Behrens & Gilles Duranton & Fr�d�ric Robert-Nicoud, 2014. "Productive Cities: Sorting, Selection, and Agglomeration," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 507 - 553.
  4. Teresa Schlüter, 2013. "Real Wages, Amenities and the Adjustment of Working Hours Across Regional Labour Markets," SERC Discussion Papers 0130, Spatial Economics Research Centre, LSE.
  5. Wrede, Matthias, 2012. "Heterogeneous skills and homogeneous land: Segmentation and agglomeration," IWQW Discussion Paper Series 04/2012, Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).
  6. Suzanne Kok, 2014. "Matching worker skills to job tasks in the Netherlands: sorting into cities for better careers," IZA Journal of European Labor Studies, Springer, vol. 3(1), pages 1-36, December.
  7. Fredrik Carlsen & Jorn Rattso & Hildegunn E. Stokke, 2013. "Education, experience and dynamic urban wage premium," Working Paper Series 15213, Department of Economics, Norwegian University of Science and Technology.
  8. Brown, W. Mark & Newbold, Bruce & Beckstead, Desmond, 2008. "Les villes et la croissance : croissance du capital humain migratoire et in situ," L'economie canadienne en transition 2008019f, Statistics Canada, Analyse economique.
  9. Suzanne Kok, 2013. "Matching worker skills to job tasks in the Netherlands: Sorting into cities for better careers," CPB Discussion Paper 247, CPB Netherlands Bureau for Economic Policy Analysis.
  10. Rappaport, Jordan, 2008. "Consumption amenities and city population density," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 533-552, November.
  11. Brown, W. Mark & Newbold, Bruce & Beckstead, Desmond, 2008. "Cities and Growth: In Situ Versus Migratory Human Capital Growth," The Canadian Economy in Transition 2008019e, Statistics Canada, Economic Analysis.
  12. Hildegunn Stokke & Jørn Rattsø & Fredrik Carlsen, 2012. "Urban wage premium increasing with education level: Identification of agglomeration effects for Norway," ERSA conference papers ersa12p459, European Regional Science Association.
  13. Jordan Rappaport, 2006. "Consumption amenities and city crowdedness," Research Working Paper RWP 06-10, Federal Reserve Bank of Kansas City.

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