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Spatial Sorting: Why New York, Los Angeles and Detroit attract the greatest minds as well as the unskilled

Author Info

  • Eeckhout, Jan
  • Pinheiro, Roberto
  • Schmidheiny, Kurt

Abstract

We propose a theory of skill mobility across cities. It predicts the well documented city size--wage premium: the wage distribution in large cities first-order stochastically dominates that in small cities. Yet, because this premium is reflected in higher house prices, this does not necessarily imply that this stochastic dominance relation also exists in the distribution of skills. Instead, we find there is second-order stochastic dominance in the skill distribution. The demand for skills is non-monotonic as our model predicts a ``Sinatra'' as well as an ``Eminem'' effect: both the very high and the very low skilled disproportionately sort into the biggest cities, while those with medium skill levels sort into small cities. The pattern of spatial sorting is explained by a technology with a varying elasticity of substitution that is decreasing in skill density. Using CPS data on wages and Census data on house prices, we find that this technology is consistent with the observed patterns of skills.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8151.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8151
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Keywords: cities; general equilibrium; matching theory; population dynamics; sorting; wage distribution;

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Find related papers by JEL classification:
  • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
  • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
  • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

References listed on IDEAS
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  1. Jan Eeckhout & Roberto Pinheiro, 2014. "Diverse Organizations And The Competition For Talent," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 625-664, 08.
  2. Thomas J. Holmes & John J. Stevens, 2002. "Geographic Concentration and Establishment Scale," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 682-690, November.
  3. Pierre‐Philippe Combes & Gilles Duranton & Laurent Gobillon & Diego Puga & Sébastien Roux, 2012. "The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection," Econometrica, Econometric Society, vol. 80(6), pages 2543-2594, November.
  4. Jahyeong Koo & Keith Phillips & Fiona Sigalla, 1997. "Measuring regional cost of living," Working Papers 9713, Federal Reserve Bank of Dallas.
  5. Pieter A. Gautier & Michael Svarer & Coenraad N. Teulings, 2005. "Marriage and the City," CESifo Working Paper Series 1422, CESifo Group Munich.
  6. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
  7. Klaus Desmet & Esteban Rossi-Hansberg, 2014. "Spatial Development," American Economic Review, American Economic Association, vol. 104(4), pages 1211-43, April.
  8. Behrens, Kristian & Duranton, Gilles & Robert-Nicoud, Frédéric, 2010. "Productive cities: Sorting, selection and agglomeration," CEPR Discussion Papers 7922, C.E.P.R. Discussion Papers.
  9. Toni Whited & Jonas Fisher & Morris Davis, 2013. "Macroeconomic Implications of Agglomeration," 2013 Meeting Papers 893, Society for Economic Dynamics.
  10. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Inequality and Unemployment in a Global Economy," NBER Working Papers 14478, National Bureau of Economic Research, Inc.
  11. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
  12. Christian Broda & Ephraim Leibtag & David E. Weinstein, 2009. "The Role of Prices in Measuring the Poor's Living Standards," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 77-97, Spring.
  13. Christian Broda & David E. Weinstein, 2008. "Understanding International Price Differences Using Barcode Data," NBER Working Papers 14017, National Bureau of Economic Research, Inc.
  14. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
  15. Thomas J. Holmes & John J. Stevens, 2004. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Journal of Economic Geography, Oxford University Press, vol. 4(3), pages 227-250, June.
  16. Sieg, Holger & Smith, V. Kerry & Banzhaf, H. Spencer & Walsh, Randy, 2002. "Interjurisdictional housing prices in locational equilibrium," Journal of Urban Economics, Elsevier, vol. 52(1), pages 131-153, July.
  17. Morris A. Davis & Francois Ortalo-Magne, 2011. "Household Expenditures, Wages, Rents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(2), pages 248-261, April.
  18. E. D. Gould, 2007. "Cities, Workers, and Wages: A Structural Analysis of the Urban Wage Premium," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 477-506.
  19. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and Decentralized Price Competition," Econometrica, Econometric Society, vol. 78(2), pages 539-574, 03.
  20. Duranton, Gilles & Jayet, Hubert, 2005. "Is the Division of Labour Limited By the Extent of the Market? Evidence from French Cities," CEPR Discussion Papers 5087, C.E.P.R. Discussion Papers.
  21. 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.
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Cited by:

  1. Fabien CANDAU & Elisa DIENESCH, 2013. "Spatial Distribution of Skills and Regional Trade Integration," Working Papers 2012-2013_7, CATT - UPPA - Université de Pau et des Pays de l'Adour, revised Jan 2015.
  2. Kok, Suzanne & ter Weel, Bas, 2014. "Cities, Tasks and Skills," IZA Discussion Papers 8053, Institute for the Study of Labor (IZA).
  3. Antonio accetturo & Alberto Dalmazzo & Guido De Blasio, 2011. "Skill Polarization in Local Labour Markets under Share-Altering Technical Change," Department of Economics University of Siena 625, Department of Economics, University of Siena.
  4. Donald R. Davis & Jonathan I. Dingel, 2012. "A Spatial Knowledge Economy," NBER Working Papers 18188, National Bureau of Economic Research, Inc.
  5. Marco Francesconi & Mich�le Belot, 2011. "Dating Preferences and Meeting Opportunities in Mate Choice Decisions," Economics Discussion Papers 702, University of Essex, Department of Economics.
  6. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent & Roux, Sébastien, 2012. "Sorting and Local Wage and Skill Distributions in France," IZA Discussion Papers 6501, Institute for the Study of Labor (IZA).
  7. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks and Skills," CPB Discussion Paper 269, CPB Netherlands Bureau for Economic Policy Analysis.
  8. Suzanne Kok, 2013. "Town and city jobs: Your job is different in another location," CPB Discussion Paper 246, CPB Netherlands Bureau for Economic Policy Analysis.
  9. repec:dgr:uvatin:20140093 is not listed on IDEAS
  10. Suzanne Kok, 2014. "Matching worker skills to job tasks in the Netherlands: sorting into cities for better careers," IZA Journal of European Labor Studies, Springer, vol. 3(1), pages 1-36, December.

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