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Learning by working in big cities

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  • de la Roca, Jorge
  • Puga, Diego

Abstract

Individual earnings are higher in bigger cities. We consider three reasons: spatial sorting of initially more productive workers, static advantages associated with workers' current location, and learning by working in big cities. Using rich administrative data for Spain, we find that workers in bigger cities do not have higher unobserved initial ability, as reflected in individual fixed-effects. Instead, they obtain an immediate static premium while working in bigger cities and also accumulate more valuable experience, which increases their earnings faster. The additional value of experience accumulated in bigger cities persists even after workers move away and is even stronger for those with higher unobserved initial ability. This combination of effects explains both the higher mean and the greater dispersion of earnings in bigger cities.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9243.

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Date of creation: Dec 2012
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Handle: RePEc:cpr:ceprdp:9243

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Keywords: agglomeration economies; city size; earnings premium; learning;

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References

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  1. Nathaniel Baum-Snow & Ronni Pavan, 2012. "Understanding the City Size Wage Gap," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 88-127.
  2. Bacolod, Marigee & Blum, Bernardo S. & Strange, William C., 2009. "Skills in the city," Journal of Urban Economics, Elsevier, vol. 65(2), pages 136-153, March.
  3. Giordano Mion & Paolo Naticchioni, 2009. "The spatial sorting and matching of skills and firms," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 28-55, February.
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Cited by:
  1. Gilles Duranton & Diego Puga, 2013. "The Growth Of Cities," Working Papers wp2013_1308, CEMFI.
  2. Tony Champion & Mike Coombes & Ian Gordon, 2013. "Urban Escalators and Inter-regional Elevators: The Difference that Location, Mobility and Sectoral Specialisation make to Occupational Progression," SERC Discussion Papers 0139, Spatial Economics Research Centre, LSE.

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