Does it Matter Where IT Workers are Located?

The predominant view in the literature is that cities affect labor productivity because spatial proximity facilitates the transfer of ideas which make workers more productive. We also anticipate that information technology, or IT (both equipment and labor), by facilitating human communication and speeding up the flow of ideas and data, also contributes to enhancing the productivity of workers within cities. Thus, workers will be more productive in cities with a large endowment of these two factors of production. The objective of this paper is twofold. First, it describes the spatial characteristics of IT workers in the United States. Second, it tests the hypothesis that in cities with a higher endowment of IT workers wages (a proxy for productivity) would be higher after controlling for the characteristics of individual workers and city-specific characteristics that also affect wages. Using data from the 2000 US Census of Population (5% PUMS), we find evidence of a wage premium, especially for college-educated workers, associated with living in a city that has a large concentration of IT workers. On the basis of our findings, we propose to move the discussion on the future of cities from the effect of IT equipment on face-to-face communication to the impact on cities of losing IT workers.