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Cities, skills, and inequality

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Christopher H. Wheeler

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Abstract

The surge in U.S. wage inequality over the past several decades is now commonly attributed to an increase in the returns paid to skill. Although theories differ with respect to why, specifically, this increase has come about, many agree that it is strongly tied to the increase in the relative supply of skilled (i.e. highly educated) workers in the U.S. labor market. A greater supply of skilled labor, for example, may have induced skill-biased technological change or generated greater stratification of workers by skill across firms or jobs. Given that metropolitan areas in the U.S. have long possessed more educated populations than non-metropolitan areas, these theories suggest that the rise in both the returns to skill and wage inequality should have been particularly pronounced in cities. Evidence from the U.S. Census over the period 1950 to 1990 supports both implications.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2004-020.

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Date of creation: 2004
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Publication status: Published in Growth and Change, Summer 2005, 36(3), pp. 329-53
Handle: RePEc:fip:fedlwp:2004-020

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Keywords: Wages Regional economics

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