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Cities and the growth of wages among young workers: evidence from the NLSY

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  • Christopher H. Wheeler

Abstract

Human capital-based theories of cities suggest that large, economically diverse urban agglomerations increase worker productivity by increasing the rate at which individuals acquire skills. One largely unexplored implication of this theory is that workers in big cities should see faster growth in their earnings over time than comparable workers in smaller markets. This paper examines this implication using data on a sample of young male workers drawn from the National Longitudinal Survey of Youth 1979 Cohort. The results suggest that earnings growth does tend to be faster in large, economically diverse local labor markets - defined as counties and metropolitan areas - than in smaller, more specialized markets. Yet, when examined in greater detail, I also find that this association tends to be the product of faster wage growth due to job changes rather than faster wage growth experienced while on a particular job. This result is consistent with the idea that cities enhance worker productivity through a job search and matching process and, thus, that an important aspect of 'learning' in cities may involve individuals learning about what they do well.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2005-055.

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Date of creation: 2005
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Handle: RePEc:fip:fedlwp:2005-055

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Keywords: Wages ; Labor mobility;

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  1. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
  2. Alberto F. Ades & Edward L. Glaeser, 1999. "Evidence On Growth, Increasing Returns, And The Extent Of The Market," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 1025-1045, August.
  3. Robert H. Topel & Michael P. Ward, 1988. "Job Mobility and the Careers of Young Men," NBER Working Papers 2649, National Bureau of Economic Research, Inc.
  4. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  5. Antonio Ciccone & Robert E. Hall, 1996. "Productivity and the Density of Economic Activity," NBER Working Papers 4313, National Bureau of Economic Research, Inc.
  6. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
  7. Derek Neal, 1998. "The Complexity of Job Mobility Among Young Men," NBER Working Papers 6662, National Bureau of Economic Research, Inc.
  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.
  9. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
  10. Edward L. Glaeser, 1997. "Learning in Cities," Harvard Institute of Economic Research Working Papers 1814, Harvard - Institute of Economic Research.
  11. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
  12. Thomas J. Holmes, 1999. "Scale of Local Production and City Size," American Economic Review, American Economic Association, vol. 89(2), pages 317-320, May.
  13. Wheeler, Christopher H, 2001. "Search, Sorting, and Urban Agglomeration," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 879-99, October.
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