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

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  • 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.

Suggested Citation

  • Eeckhout, Jan & Pinheiro, Roberto & Schmidheiny, Kurt, 2010. "Spatial Sorting: Why New York, Los Angeles and Detroit attract the greatest minds as well as the unskilled," CEPR Discussion Papers 8151, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8151
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    References listed on IDEAS

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    Cited by:

    1. Donald R. Davis & Jonathan I. Dingel, 2012. "A Spatial Knowledge Economy," NBER Working Papers 18188, National Bureau of Economic Research, Inc.
    2. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent & Roux, Sébastien, 2012. "Sorting and local wage and skill distributions in France," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 913-930.
    3. Edivaldo C. Neves Jr & Carlos R. Azzoni, Andre Chagas, 2017. "Skill wage premium and city size," Working Papers, Department of Economics 2017_19, University of São Paulo (FEA-USP).
    4. 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;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-36, December.
    5. Antonio Accetturo & Alberto Dalmazzo & Guido Blasio, 2014. "Skill Polarization In Local Labor Markets Under Share-Altering Technical Change," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 249-272, March.
    6. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks, And Skills," Journal of Regional Science, Wiley Blackwell, vol. 54(5), pages 856-892, November.
    7. Jorge De La Roca & Diego Puga, 2017. "Learning by Working in Big Cities," Review of Economic Studies, Oxford University Press, vol. 84(1), pages 106-142.
    8. Rafael Alvarado & Miguel Atienza, 2014. "The role of market access and human capital in regional wage disparities: Empirical evidence for Ecuador," Documentos de Trabajo en Economia y Ciencia Regional 50, Universidad Catolica del Norte, Chile, Department of Economics, revised Mar 2014.
    9. 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.
    10. 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.
    11. Or Levkovich & Jan Rouwendal, 2014. "Location Choices of highly Educated Foreign Workers: the Importance of Urban Amenities," Tinbergen Institute Discussion Papers 14-093/VIII, Tinbergen Institute.
    12. Yuming Fu & Yang Hao, 2015. "An Urban Accounting for Geographic Concentration of Skills and Welfare Inequality," ERSA conference papers ersa15p734, European Regional Science Association.

    More about this item

    Keywords

    cities; general equilibrium; matching theory; population dynamics; sorting; wage distribution;

    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

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