Understanding the City Size Wage Gap
AbstractIt is widely documented that wages are higher in larger cities. This relationship is robust to controls for age, schooling and labor market experience. This paper investigates the causes of the city size wage gap. In particular, we propose a unified framework for empirically investigating the extent to which selection on underlying productivity or ability, firm-worker matching and human capital spillovers can account for observed differences in wages between large and small cities. Our analysis utilizes a model of job search that incorporates endogenous migration between large and small cities. This model is rich enough to allow for recovery of the underlying ability distributions of workers by city size, arrival rates of job offers by ability and location, and returns to experience by ability and location, when structurally estimated using longitudinal data. These estimates facilitate a more complete empirical decomposition of the city size wage gap than is possible using results in existing research and produce new empirical evidence on the relative importance of various mechanisms by which larger cities are more productive.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2009 Meeting Papers with number 524.
Date of creation: 2009
Date of revision:
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
Web page: http://www.EconomicDynamics.org/society.htm
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Other versions of this item:
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- 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
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- Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2012.
"The Economics of Density: Evidence from the Berlin Wall,"
CEP Discussion Papers
dp1154, Centre for Economic Performance, LSE.
- Sturm, Daniel & Ahlfeldt, Gabriel & Redding, Stephen & Wolf, Nikolaus, 2013. "The Economics of Density: Evidence from the Berlin Wall," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79873, Verein für Socialpolitik / German Economic Association.
- Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2012. "The Economics of Density: Evidence from the Berlin Wall," SERC Discussion Papers 0118, Spatial Economics Research Centre, LSE.
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