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City of Dreams

Author

Listed:
  • Jorge De la Roca

    (University of Southern California)

  • Gianmarco I. P. Ottaviano

    (LSE and University of Bologna)

  • Diego Puga

    (CEMFI, Centro de Estudios Monetarios y Financieros)

Abstract

Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone. However, there is little sorting on ability. We show this is partly because young individuals have an imperfect assessment of their ability, and, when they learn about it, early decisions have had a lasting impact and reduce their incentives to move. We formalize this idea through an overlapping generations model of urban sorting by workers with heterogeneous ability and self-confidence. Using data from the NLSY79, we find that the citysize choices of individuals vary with ability and self-confidence in line with our theoretical predictions.

Suggested Citation

  • Jorge De la Roca & Gianmarco I. P. Ottaviano & Diego Puga, 2016. "City of Dreams," Working Papers wp2016_1609, CEMFI.
    • Handle: RePEc:cmf:wpaper:wp2016_1609
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    References listed on IDEAS

    as
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    Cited by:

    1. Ahlin, Lina & Andersson, Martin & Thulin, Per, 2016. "Human Capital Sorting - the ‘when’ and ‘who’ of sorting of talents to urban regions," Papers in Innovation Studies 2016/10, Lund University, CIRCLE - Centre for Innovation Research.
    2. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    3. Jorge De La Roca & Diego Puga, 2017. "Learning by Working in Big Cities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 106-142.
    4. Charly Porcher & Hannah Rubinton & Clara Santamaría, 2020. "The Role of Establishment Size in the City-Size Earnings Premium," Working Papers 2020-029, Federal Reserve Bank of St. Louis, revised 29 Nov 2022.
    5. De la Roca, Jorge, 2017. "Selection in initial and return migration: Evidence from moves across Spanish cities," Journal of Urban Economics, Elsevier, vol. 100(C), pages 33-53.

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    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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