The Wage Gap between Metropolitan and Non-metropolitan Areas
AbstractIn the literature on measured wage inequality, only one recent study, by Glaeser and Mare(2001), has focused on the enormous wage gap between urban and non-urban workers in the United States. In the present paper, I replicate and extend Glaeser and Mare's original empirical work, and I present a new interpretation of the evidence based on my re-estimation. Contrary to Glaeser and Mare's theory that urban employment induces more rapid skill acquisition, I find that wage growth is no greater for urban workers than for non-urban workers. I show that both the original and extended empirical patterns can be fully explained by a simple spatial equilibrium model that incorporates two highly plausible phenomena: (1) a compensating wage differential for the higher cost of living in cities and (2) a dynamic tendency for more able workers to gravitate to cities once they discover that they belong in the "big leagu
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Date of creation: 11 Aug 2004
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urban/non-urban wage gap; real wage gap; dynamic ability sorting; and market learning;
Find related papers by JEL classification:
- 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-2004-08-16 (All new papers)
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