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Learning By Working In Big Cities

Individual earnings are higher in bigger cities. We consider three reasons: spatial sorting of initially more productive workers, static advantages from workers’ current location, and learning by working in bigger cities. Using rich administrative data for Spain, we find that workers in bigger cities do not have higher initial ability as reflected in fixed effects. Instead, they obtain an immediate static premium and accumulate more valuable experience. The additional value of experience in bigger cities persists after leaving and is stronger for those with higher initial ability. This explains both the higher mean and greater dispersion of earnings in bigger cities.

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Paper provided by CEMFI in its series Working Papers with number wp2013_1301.

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Date of creation: Jan 2013
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Handle: RePEc:cmf:wpaper:wp2013_1301
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  1. Mion, Giordano & Naticchioni, Paolo, 2007. "The spatial sorting and matching of skills and firms," MPRA Paper 1721, University Library of Munich, Germany.
  2. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-75, April.
  3. Nathaniel Baum-Snow & Ronni Pavan, 2012. "Understanding the City Size Wage Gap," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 88-127.
  4. 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.
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