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Worker Sorting and Agglomeration Economies

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  • Theodore Papageorgiou

    (Penn State University)

Abstract

This paper argues that larger cities allow workers to find better occupational matches. We introduce a framework where workers are initially uncertain about the quality of their match with each occupation. They can switch occupations within cities at no cost, whereas moving across cities is costly. Larger cities offer workers more options, who in turn become more selective, and, in equilibrium, earn higher wages. Using data from the SIPP, we find support for the setup's implications regarding worker mobility: conditional on wages, workers in metropolitan areas are more likely to switch occupations; they are also less likely to move; the negative effect of metro areas on the moving probability is significantly larger for workers who recently moved there; workers who move and switch occupations experience significant wage gains, whereas moving without occupational switching does not affect wages; workers who move from a metro area continue to earn higher wages in their new location, but only if they do not switch occupations.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 660.

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Date of creation: 2011
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Handle: RePEc:red:sed011:660

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  1. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  2. Dora L. Costa & Matthew E. Kahn, 1999. "Power Couples: Changes in the Locational Choice of the College Educated, 1940-1990," NBER Working Papers 7109, National Bureau of Economic Research, Inc.
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Cited by:
  1. Pedro Silos & Eric Smith, 2012. "Human capital portfolios," Working Paper 2012-03, Federal Reserve Bank of Atlanta.

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