The Urban Wage Growth Premium: Sorting or Learning?
AbstractThis paper is concerned with the urban wage premium and addresses two central issues about which the field has not yet reached a consensus. First, the extent to which sorting of high ability individuals into urban areas explains the urban wage premium. Second, whether workers receive this wage premium immediately, or through faster wage growth over time. Using a large panel of worker-level data from Britain, we first demonstrate the existence of an urban premium for wage levels, which increases in city size. We next provide evidence of a city size premium on wage growth, but show that this effect is driven purely by the increase in wage that occurs in the first year that a worker moves to a larger location. Controlling for sorting on the basis of unobservables we find no evidence of an urban wage growth premium. Experience in cities does have some impact on wage growth, however. Specifically, we show that workers who have at some point worked in a city experience faster wage growth than those who have never worked in a city.
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Bibliographic InfoPaper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0135.
Date of creation: May 2013
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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp
urban wage premium; agglomeration; cities; wage growth; worker mobility;
Find related papers by JEL classification:
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-05-24 (All new papers)
- NEP-GEO-2013-05-24 (Economic Geography)
- NEP-LAB-2013-05-24 (Labour Economics)
- NEP-LMA-2013-05-24 (Labor Markets - Supply, Demand, & Wages)
- NEP-URE-2013-05-24 (Urban & Real Estate Economics)
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