The Relationship between Location Choice and Earnings Inequality
AbstractThis paper provides new empirical evidence about how workers’ locations affect measurements of earnings inequality (and their changes over time) in the United States. Part of the inequality observed in any given U.S. sample is due to the fact that workers with different skills (and therefore earnings) are not distributed symmetrically across locations that are more and less productive (and therefore pay higher and lower wages). In particular, I estimate that a significant and rising proportion of the college wage premium is due to college graduates living in and moving toward higher-paying locations than high school graduates. Furthermore, I assess the impact of location on real wage inequality (adjusting for local costs of living). The higher wages that college graduates enjoy as a result of their location choices are mostly counterbalanced by higher costs of living. From this, I infer that college graduates choose to live in more economically productive labor markets than do workers with less education, but college graduates are not necessarily more capable of exploiting locational wage differences for their own advantage.
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Bibliographic InfoPaper provided by Department of Economics, College of William and Mary in its series Working Papers with number 112.
Length: 35 pages
Date of creation: 21 Feb 2011
Date of revision:
Earnings inequality; Migration; Regional labor markets;
Other versions of this item:
- Peter McHenry, 2012. "The Relationship between Location Choice and Earnings Inequality," Working Papers 118, Department of Economics, College of William and Mary.
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-05 (All new papers)
- NEP-GEO-2011-03-05 (Economic Geography)
- NEP-LAB-2011-03-05 (Labour Economics)
- NEP-MIG-2011-03-05 (Economics of Human Migration)
- NEP-URE-2011-03-05 (Urban & Real Estate Economics)
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.:
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2007-031, Federal Reserve Bank of St. Louis.
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e-94-11, Hoover Institution, Stanford University.
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- Autor, David & Dorn, David, 2009. "Inequality and Specialization: The Growth of Low-Skill Service Jobs in the United States," IZA Discussion Papers 4290, Institute for the Study of Labor (IZA).
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