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Wages and the City. Evidence from Italy

Author

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  • Sabrina Di Addario

    (University of Oxford and Bank of Italy)

  • Eleonora Patacchini

    (University of Rome “La Sapienza”)

Abstract

We analyze empirically the impact of urban agglomeration on Italian wages. Using microdata from the Bank of Italy\'s Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets, we test whether the structure of wages varies with urban scale. We find that every additional 100,000 inhabitants in the local labor market raises earnings by 0.1 percent. The use of a geographical approach enables us to state that this effect decays very rapidly with distance, losing significance beyond approximately 12 kilometers. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to worker supervisors and office workers.

Suggested Citation

  • Sabrina Di Addario & Eleonora Patacchini, 2007. "Wages and the City. Evidence from Italy," Development Working Papers 231, Centro Studi Luca d'Agliano, University of Milano.
  • Handle: RePEc:csl:devewp:231
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    More about this item

    Keywords

    Wages; Urbanization; Agglomeration Externalities; Population Clustering; Worker Mobility;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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