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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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Citations

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Cited by:
  1. Pokrovsky Dmitry & Behrens Kristian & Zhelobodko Evgeny, 2014. "Market Size, Entrepreneurship, and Income Inequality," EERC Working Paper Series 14/01e, EERC Research Network, Russia and CIS.
  2. 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.
  3. Giulio Cainelli & Sandro Montresor & Giuseppe Vittucci Marzetti, 2014. "Spatial agglomeration and firm exit: a spatial dynamic analysis for Italian provinces," Small Business Economics, Springer, vol. 43(1), pages 213-228, June.
  4. Marko Koethenbuerger, 2012. "Competition for Migrants in a Federation: Tax or Transfer Competition?," EPRU Working Paper Series 2012-01, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Alberto Dalmazzo & Antonio Accetturo & Guido de Blasio, 2012. "Skill Polarization in Local Labour Markets under Share-Altering Technical Change," ERSA conference papers ersa12p288, European Regional Science Association.
  6. 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 52, Universidad Catolica del Norte, Chile, Department of Economics, revised Mar 2014.

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