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Is there an urban wage premium in Italy?

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Author Info
Sabrina Di Addario () (Bank of Italy, Economic Research Department)
Eleonora Patacchini () (University of Rome La Sapienza)

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Abstract

We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy's Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets (30 percent of the total), we test whether the structure of wages varies with urban scale. We find that every additional 100 employees per square kilometer (100,000 inhabitants) in the local labor market raises earnings by 0.4-0.6 percent (0.1 percent) and that employees working in large cities earn, on average, 2-3 percent higher wages than those in the rest of the economy. The application of spatial data analysis techniques enables us to state that this effect is present only in the large cities surrounded by low-populated areas. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to managers, worker supervisors, and office workers.

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Paper provided by Bank of Italy, Economic Research Department in its series Temi di discussione (Economic working papers) with number 570.

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Date of creation: Jan 2006
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Handle: RePEc:bdi:wptemi:td_570_06

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Related research
Keywords: Wage Differentials; Urbanization; Agglomeration Externalities; Population Clustering; Spatial Autocorrelation;

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Find related papers by JEL classification:
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mion, Giordano & Naticchioni, Paolo, 2005. "Urbanization Externalities, Market Potential and Spatial Sorting of Skills and Firms," CEPR Discussion Papers 5172, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Sabrina Di Addario, 2005. "Job Search in Thick Markets: Evidence from Italy," Development Working Papers 198, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
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  3. Mion, Giordano & Naticchioni, Paolo, 2007. "The spatial sorting and matching of skills and firms," MPRA Paper 1721, University Library of Munich, Germany. [Downloadable!]
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