IDEAS home Printed from https://ideas.repec.org/p/kob/dpaper/dp2024-09.html
   My bibliography  Save this paper

Distinguishing the Urban Wage Premium from Human Capital Externalities: Evidence from Mexico

Author

Listed:
  • Keisuke Kondo

    (Research Institute of Economy, Trade and Industry and Research Institute for Economics and Business Administration, Kobe University, JAPAN)

Abstract

This study bridges the gap between the urban wage premium and human capital externalities in Mexico. High-skilled workers tend to be concentrated in large cities, leading to higher wages in large cities. Merging worker-level microdata with geographical data in Mexico and employing the two-step approach of the Mincer wage equation, this study identifies whether urban wage premium and human capital externalities explain local wage premium, focusing on worker heterogeneity. This study finds that the spatial sorting of workers and firms and human capital externalities entirely explain the urban wage premium in Mexico. An interesting finding is the heterogeneous effect of human capital externalities on the wages of high- and low-skilled workers. Low-skilled workers benefit from human capital externalities, whereas high-skilled workers do not. However, compared with low-skilled workers, high-skilled workers get more than twice the private return to education anywhere they work. This study provides evidence that locations where high-skilled workers are concentrated can pay higher wages to low-skilled workers due to human capital externalities, compensating for their lower private return to education.

Suggested Citation

  • Keisuke Kondo, 2024. "Distinguishing the Urban Wage Premium from Human Capital Externalities: Evidence from Mexico," Discussion Paper Series DP2024-09, Research Institute for Economics & Business Administration, Kobe University, revised Apr 2024.
    • Handle: RePEc:kob:dpaper:dp2024-09
    as

    Download full text from publisher

    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2024-09.pdf
    File Function: Revised version, 2024
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Urban wage premium; Human capital externalities; Spatial sorting; Private returns to education; Social returns to education;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kob:dpaper:dp2024-09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University (email available below). General contact details of provider: https://edirc.repec.org/data/rikobjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.