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Ability sorting and consumer city

  • Lee, Sanghoon

This paper provides a consumption-side explanation for the urban wage premium. The paper shows that if the taste for consumption variety is a luxury good, high average wages in large cities can be due to the selection of high-skill workers choosing to live there. A unique implication is that urban wage premiums are decreasing in skills and can even be negative for very high-skill workers. I confirm this implication using data on the health care workers.

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File URL: http://www.sciencedirect.com/science/article/B6WMG-4YNT431-1/2/0b0fa836f686c6ffcb9640914d2ca2a9
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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 68 (2010)
Issue (Month): 1 (July)
Pages: 20-33

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Handle: RePEc:eee:juecon:v:68:y:2010:i:1:p:20-33
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. J.V. Henderson, 1972. "Optimum City Size: The External Diseconomy Question," Working Papers 91, Queen's University, Department of Economics.
  2. Janice Compton & Robert A. Pollak, 2007. "Why Are Power Couples Increasingly Concentrated in Large Metropolitan Areas?," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 475-512.
  3. Steven Berry & Joel Waldfogel, 2003. "Product Quality and Market Size," NBER Working Papers 9675, National Bureau of Economic Research, Inc.
  4. Gautier, Pieter A. & Svarer, Michael & Teulings, Coen N., 2010. "Marriage and the city: Search frictions and sorting of singles," Journal of Urban Economics, Elsevier, vol. 67(2), pages 206-218, March.
  5. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
  6. Dahl, Michael S. & Sorenson, Olav, 2010. "The migration of technical workers," Journal of Urban Economics, Elsevier, vol. 67(1), pages 33-45, January.
  7. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc.
  8. Mark Bils & Peter J. Klenow, 2001. "Quantifying Quality Growth," American Economic Review, American Economic Association, vol. 91(4), pages 1006-1030, September.
  9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  10. Wheeler, Christopher H., 2006. "Cities and the growth of wages among young workers: Evidence from the NLSY," Journal of Urban Economics, Elsevier, vol. 60(2), pages 162-184, September.
  11. Wheaton, William C. & Lewis, Mark J., 2002. "Urban Wages and Labor Market Agglomeration," Journal of Urban Economics, Elsevier, vol. 51(3), pages 542-562, May.
  12. Rosenthal, Stuart S. & Strange, William C., 2008. "The attenuation of human capital spillovers," Journal of Urban Economics, Elsevier, vol. 64(2), pages 373-389, September.
  13. Edward L. Glaeser & Jed Kolko & Albert Saiz, 2000. "Consumer City," Harvard Institute of Economic Research Working Papers 1901, Harvard - Institute of Economic Research.
  14. Marigee Bacolod & Bernardo S. Blum & William C. Strange, 2009. "Urban interactions: soft skills versus specialization," Journal of Economic Geography, Oxford University Press, vol. 9(2), pages 227-262, March.
  15. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June.
  16. Tabuchi, Takatoshi & Yoshida, Atsushi, 2000. "Separating Urban Agglomeration Economies in Consumption and Production," Journal of Urban Economics, Elsevier, vol. 48(1), pages 70-84, July.
  17. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-42, April.
  18. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
  19. Rappaport, Jordan & Kahn, Matthew E. & Glaeser, Edward, 2008. "Why Do The Poor Live In Cities? The Role of Public Transportation," Scholarly Articles 2958224, Harvard University Department of Economics.
  20. Bacolod, Marigee & Blum, Bernardo S. & Strange, William C., 2009. "Skills in the city," Journal of Urban Economics, Elsevier, vol. 65(2), pages 136-153, March.
  21. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
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