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Urban Density, Human Capital, and Productivity: An empirical analysis using wage data

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  • MORIKAWA Masayuki

Abstract

Numerous studies have indicated that densely populated cities enhance the productivity of workers through knowledge spillover and superior matching with employers in the labor market. This paper quantitatively analyzes the relationship among urban density, human capital, and wages by using micro data from the Basic Survey on Wage Structure for the years from 1990 to 2009. According to the estimation of standard wage functions augmented with population density, the agglomeration premium is larger for workers with higher observable skills such as education, tenure, and potential experience, which suggests rapid learning and superior matching in densely populated cities. Under structural changes such as a declining population and the trend toward a knowledge-based service economy, forming densely populated areas by facilitating the migration of workers has desirable effects throughout Japan on both individual wages and firm productivity.

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Bibliographic Info

Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11060.

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Length: 28 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:eti:dpaper:11060

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  1. Nathaniel Baum-Snow & Ronni Pavan, 2010. "Understanding the city size wage gap," Working Papers 2010/27, Institut d'Economia de Barcelona (IEB).
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  8. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-42, April.
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  10. Richard Blundell & Lorraine Dearden & Costas Meghir & Barbara Sianesi, 1999. "Human capital investment: the returns from education and training to the individual, the firm and the economy," Fiscal Studies, Institute for Fiscal Studies, vol. 20(1), pages 1-23, March.
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  12. MORIKAWA Masayuki, 2008. "Economies of Density and Productivity in Service Industries: An Analysis of Personal-Service Industries Based on Establishment-Level Data," Discussion papers 08023, Research Institute of Economy, Trade and Industry (RIETI).
  13. Chul Chung & Jeremy Clark & Bonggeun Kim, 2008. "Is the Growing Skill Premium a Purely Metropolitan Issue?," Working Papers in Economics 08/10, University of Canterbury, Department of Economics and Finance.
  14. Krashinsky, Harry, 2011. "Urban agglomeration, wages and selection: Evidence from samples of siblings," Labour Economics, Elsevier, vol. 18(1), pages 79-92, January.
  15. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004. "Spatial Wage Disparities: Sorting Matters!," CEPR Discussion Papers 4240, C.E.P.R. Discussion Papers.
  16. Christoffersen, Susan E.K. & Sarkissian, Sergei, 2009. "City size and fund performance," Journal of Financial Economics, Elsevier, vol. 92(2), pages 252-275, May.
  17. Sabrina Di Addario & Eleonora Patacchini, 2007. "Wages and the City. Evidence from Italy," Development Working Papers 231, Centro Studi Luca d\'Agliano, University of Milano.
  18. Yankow, Jeffrey J., 2006. "Why do cities pay more? An empirical examination of some competing theories of the urban wage premium," Journal of Urban Economics, Elsevier, vol. 60(2), pages 139-161, September.
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