The Estimation of Urban Premium Wage Using Propensity Score Analysis: Some Considerations from the Spatial Perspective

The urban economics literature supports that thick labor markets pay higher wage levels than thin labor markets. Glaeser and Mare (2001) estimate the elasticity wage-city size larger than one million inhabitants around of 36 % higher than smaller areas, while Glaeser and Messenger (2010) identify a elasticity of 45 % for the case of skilled workers. This positive relation also exists within industries, but with an uneven impact (Elvery 2010). In spite of the extensive empirical evidence, the most of the applications have been focused on North American, European and Asian contexts. In this chapter we extend the analysis toward the Latin American case, where the ONU-Wider has strongly recommended focusing on “increasing inequalities partly as a consequence of the uneven impact of trade openness and globalization” (Kanbur et al. 2005). We use the Chilean case and provide a first estimation of wage differentials between thick and thin labor markets. Although the extension toward new contexts could be considered a contribution as itself, the particular scenario of Latin American realities must be discussed.