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IT and Urban Polarization

Author

Listed:
  • Jan Eeckhout
  • Christoph Hedtrich
  • Roberto Pinheiro

Abstract

We show that differential IT investment across cities has been a key driver of job and wage polarization since the 1990s. Using a novel dataset, we establish two stylized facts: IT investment is highest in firms in large and expensive cities, and the decline in routine cognitive occupations is most prevalent in large and expensive cities. We propose and estimate a model and find that the fall in IT prices helps explain the wage gap between routine and nonroutine cognitive jobs, as well as the shift in employment away from routine cognitive toward nonroutine cognitive jobs.

Suggested Citation

  • Jan Eeckhout & Christoph Hedtrich & Roberto Pinheiro, 2026. "IT and Urban Polarization," American Economic Journal: Macroeconomics, American Economic Association, vol. 18(1), pages 223-259, January.
    • Handle: RePEc:aea:aejmac:v:18:y:2026:i:1:p:223-59
    DOI: 10.1257/mac.20220306
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • 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
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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