Understanding the City Size Wage Gap
In this paper, we decompose city size wage premia into various components. We base these decompositions on an estimated on-the-job search model that incorporates latent ability, search frictions, firm-worker match quality, human capital accumulation, and endogenous migration between large, medium, and small cities. Counterfactual simulations of the model indicate that variation in returns to experience and differences in wage intercepts across location type are the most important mechanisms contributing to observed city size wage premia. Variation in returns to experience is more important for generating wage premia between large and small locations, while differences in wage intercepts are more important for generating wage premia between medium and small locations. Sorting on unobserved ability within education group and differences in labour market search frictions and distributions of firm-worker match quality contribute little to observed city size wage premia. These conclusions hold for separate samples of high school and college graduates. Copyright 2012, Oxford University Press.
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Volume (Year): 79 (2012)
Issue (Month): 1 ()
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- Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2014.
"The Economics of Density: Evidence from the Berlin Wall,"
NBER Working Papers
20354, National Bureau of Economic Research, Inc.
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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," SERC Discussion Papers 0118, Spatial Economics Research Centre, LSE.
- 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.
- Ahlfeldt, Gabriel & Redding, Stephen J. & Sturm, Daniel M & Wolf, Nikolaus, 2014. "The Economics of Density: Evidence from the Berlin Wall," CEPR Discussion Papers 10097, C.E.P.R. Discussion Papers.
- Alessia Matano & Paolo Naticchioni, 2009. "Wage distribution and the spatial sorting of workers and firms," Working Papers - Dipartimento di Economia 8-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
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