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Spatial sorting

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  • Jan Eeckhout

    ()
    (Institute for Fiscal Studies)

  • Roberto Pinheiro
  • Kurt Schmidheiny

Abstract

We investigate the role of complementarities in production and skill mobility across cities. We propose a general equilibrium model of location choice by heterogeneously skilled workers, and consider different degrees of complementarities between the skills of workers. The nature of the complementarities determines the equilibrium skill distribution across cities. We prove that with extreme-skill complementarity, the skill distribution has fatter tails in large cities; with top-skill complementarity, there is first-order stochastic dominance. Using the model to back out skills from wage and housing price data, we find robust evidence of fat tails in large cities. Big cities have big inequality. This pattern of spatial sorting is consistent with extreme-skill complementarity: the productivity of high skilled workers and of the providers of low skilled services is mutually enhanced.

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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W13/18.

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Date of creation: Aug 2013
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Handle: RePEc:ifs:ifsewp:13/18

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Related research

Keywords: complementarity; cities; sorting; price-theoretic measure of skills; population mobility; city size; matching theory; general equilibrium; skill distribution;

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References

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Cited by:
  1. Antonio accetturo & Alberto Dalmazzo & Guido De Blasio, 2011. "Skill Polarization in Local Labour Markets under Share-Altering Technical Change," Department of Economics University of Siena 625, Department of Economics, University of Siena.
  2. Rafael Alvarado & Miguel Atienza, 2014. "The role of market access and human capital in regional wage disparities: Empirical evidence for Ecuador," Documentos de Trabajo en Economia y Ciencia Regional 53, Universidad Catolica del Norte, Chile, Department of Economics, revised Mar 2014.
  3. Behrens, Kristian & Pokrovsky, Dmitry & Zhelobodko, Evgeny, 2014. "Market Size, Entrepreneurship, and Income Inequality," CEPR Discussion Papers 9831, C.E.P.R. Discussion Papers.
  4. Marko Köthenbürger, 2012. "Competition for Migrants in a Federation: Tax or Transfer Competition?," CESifo Working Paper Series 3709, CESifo Group Munich.
  5. Suzanne Kok, 2013. "Town and city jobs: Your job is different in another location," CPB Discussion Paper 246, CPB Netherlands Bureau for Economic Policy Analysis.

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