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What Drives the Urban Wage Premium? Evidence along the Wage Distribution

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  • Alessia Matano

    ()
    (Faculty of Economics, University of Barcelona)

  • Paolo Naticchioni

    ()
    (University of Cassino, University of Rome “La Sapienza”, CeLEG-Luiss)

Abstract

This paper aims at disentangling the role played by different theoretical explanations in accounting for the urban wage premium along the wage distribution. We analyze the wage dynamics of migrants from low-to-high-density areas in Italy, using quantile regression and individual panel data to control for the sorting of workers. The results show that skilled workers enjoy a higher wage premium when they migrate (wage level effect), in line with the agglomeration externalities explanation, while unskilled workers benefit more from a wage premium accruing over time (wage growth effect). Further, investigating the determinants of the wage growth effect in greater depth, we find that for unskilled workers the wage growth is mainly due to human capital accumulation over time, consistently with the “learning” hypothesis, while for skilled workers it is the “coordination” hypothesis that matters..

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Bibliographic Info

Paper provided by University of Barcelona, Regional Quantitative Analysis Group in its series AQR Working Papers with number 201202.

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Length: 34 pages
Date of creation: Jan 2012
Date of revision: Feb 2012
Handle: RePEc:aqr:wpaper:201202

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Keywords: Urban Wage Premium; Human Capital; Spatial Sorting; Wage Distribution; Quantile Fixed Effects. JEL classification: J31; J61; R23;

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  1. Glaeser, Edward L., 1999. "Learning in Cities," Journal of Urban Economics, Elsevier, vol. 46(2), pages 254-277, September.
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  23. Alessia Matano & Paolo Naticchioni, 2009. "Wage distribution and the spatial sorting of workers and firms," Working Papers - Dipartimento di Economia 8-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
  24. Möller, Joachim & Haas, Anette, 2002. "The agglomeration wage differential reconsidered - an investigation with German micro data 1984-1997," ERSA conference papers ersa02p327, European Regional Science Association.
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