IDEAS home Printed from https://ideas.repec.org/a/eee/regeco/v55y2015icp14-27.html
   My bibliography  Save this article

Why does skill intensity vary across cities? The role of housing cost

Author

Listed:
  • Broxterman, Daniel A.
  • Yezer, Anthony M.

Abstract

The ratio of skilled (college graduate) to unskilled (non-college graduate) workers (the skill intensity ratio, SIR) varies substantially across cities and the variance in the SIR has increased significantly since 1970. Recent research finds that the ratio of skilled to unskilled worker earnings (the skilled wage ratio, SWR) also varies significantly. The “income elasticity hypothesis” (IEH) holds that if, as empirical evidence suggests, the income elasticity of demand for housing is significantly below unity, then the SWR should vary inversely with house prices. This implication of the IEH has been confirmed in empirical tests and leads to a further consequence of the IEH. If the SWR varies inversely with house prices, the SIR should vary directly as employers substitute more skilled workers when the SWR falls. This provides the opportunity for a new test of the IEH which is conducted here. The results strongly confirm, consistent with the IEH, that housing cost is an important determinant of variation in the SIR across cities.

Suggested Citation

  • Broxterman, Daniel A. & Yezer, Anthony M., 2015. "Why does skill intensity vary across cities? The role of housing cost," Regional Science and Urban Economics, Elsevier, vol. 55(C), pages 14-27.
  • Handle: RePEc:eee:regeco:v:55:y:2015:i:c:p:14-27
    DOI: 10.1016/j.regsciurbeco.2015.08.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0166046215000678
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Berry, Christopher R. & Glaeser, Edward L., 2005. "Divergence of Human Capital Levels across Cities," Working Paper Series rwp05-057, Harvard University, John F. Kennedy School of Government.
    2. Dan Black & Natalia Kolesnikova & Lowell Taylor, 2009. "Earnings Functions When Wages and Prices Vary by Location," Journal of Labor Economics, University of Chicago Press, vol. 27(1), pages 21-47, January.
    3. Enrico Moretti, 2013. "Real Wage Inequality," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 65-103, January.
    4. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    5. Kim, Sukkoo & Margo, Robert A., 2004. "Historical perspectives on U.S. economic geography," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 66, pages 2981-3019, Elsevier.
    6. Edward L. Glaeser & Joseph Gyourko, 2005. "Urban Decline and Durable Housing," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 345-375, April.
    7. Michael K. Hollar, 2011. "Central Cities And Suburbs: Economic Rivals Or Allies?," Journal of Regional Science, Wiley Blackwell, vol. 51(2), pages 231-252, May.
    8. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2013. "Superstar Cities," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 167-199, November.
    9. Kim, Dongsoo & Liu, Feng & Yezer, Anthony, 2009. "Do inter-city differences in intra-city wage differentials have any interesting implications?," Journal of Urban Economics, Elsevier, vol. 66(3), pages 203-209, November.
    10. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, December.
    11. David Albouy, 2008. "Are Big Cities Bad Places to Live? Estimating Quality of Life across Metropolitan Areas," NBER Working Papers 14472, National Bureau of Economic Research, Inc.
    12. Ioannides, Yannis M. & Zabel, Jeffrey E., 2008. "Interactions, neighborhood selection and housing demand," Journal of Urban Economics, Elsevier, vol. 63(1), pages 229-252, January.
    13. Elvery, Joel A., 2010. "City size and skill intensity," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 367-379, November.
    14. Brinkman, Jeffrey, 2014. "The supply and demand of skilled workers in cities and the role of industry composition," Working Papers 14-32, Federal Reserve Bank of Philadelphia.
    15. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
    16. Brown, Scott J. & Coulson, N. Edward & Engle, Robert F., 1992. "On the determination of regional base and regional base multipliers," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 619-635, November.
    17. Glaeser, Edward L. & Kahn, Matthew E. & Rappaport, Jordan, 2008. "Why do the poor live in cities The role of public transportation," Journal of Urban Economics, Elsevier, vol. 63(1), pages 1-24, January.
    18. Samuelson, Paul A, 1983. "Thunen at Two Hundred," Journal of Economic Literature, American Economic Association, vol. 21(4), pages 1468-1488, December.
    19. Wheeler, Christopher H., 2004. "On the distributional aspects of urban growth," Journal of Urban Economics, Elsevier, vol. 55(2), pages 371-397, March.
    20. Patricia Beeson & Tara Watson & Lara Shore-Sheppard, 2010. "Local Fiscal Policies and Urban Wage Structures," Department of Economics Working Papers 2010-05, Department of Economics, Williams College.
    21. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
    22. Patricia Beeson & Lara Shore-Sheppard & Tara Watson, 2010. "Local Fiscal Policies and Urban Wage Structures," Public Finance Review, , vol. 38(5), pages 540-584, September.
    23. Johnson, William R., 2014. "House prices and female labor force participation," Journal of Urban Economics, Elsevier, vol. 82(C), pages 1-11.
    24. Christopher R. Berry & Edward L. Glaeser, 2005. "The divergence of human capital levels across cities," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 407-444, August.
    25. Glaeser, Edward L., 2008. "Cities, Agglomeration, and Spatial Equilibrium," OUP Catalogue, Oxford University Press, number 9780199290444.
    26. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels across Cities," Harvard Institute of Economic Research Working Papers 2091, Harvard - Institute of Economic Research.
    27. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    28. Hansen, Julia L. & Formby, John P. & Smith, W. James, 1996. "The Income Elasticity of Demand for Housing: Evidence from Concentration Curves," Journal of Urban Economics, Elsevier, vol. 39(2), pages 173-192, March.
    29. David A. Jaeger & Susanna Loeb & Sarah E. Turner & John Bound, 1998. "Coding Geographic Areas Across Census Years: Creating Consistent Definitions of Metropolitan Areas," NBER Working Papers 6772, National Bureau of Economic Research, Inc.
    30. Christopher R. Berry & Edward L. Glaeser, 2005. "The Divergence of Human Capital Levels Across Cities," NBER Working Papers 11617, National Bureau of Economic Research, Inc.
    31. Lutz Hendricks, 2011. "The Skill Composition Of U.S. Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 1-32, February.
    32. Stuart S. Rosenthal & William C. Strange, 2008. "Agglomeration and Hours Worked," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 105-118, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Haixiao Wu, 2018. "Is There a Kuznets Curve for Intra-City Earnings Inequality?," Working Papers 2018-09, The George Washington University, Institute for International Economic Policy.
    2. repec:eee:regeco:v:68:y:2018:i:c:p:1-10 is not listed on IDEAS

    More about this item

    Keywords

    Skill intensity; Agglomeration; Returns to education; Unobserved heterogeneity;

    JEL classification:

    • 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
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    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:eee:regeco:v:55:y:2015:i:c:p:14-27. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/regec .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.