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What Drives the Urban Wage Premium? Evidence along the Wage Distribution

Author

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  • Alessia Matano
  • Paolo Naticchioni

    (Sapienza University of Rome Italy.)

Abstract

This paper aims at disentangling the role played by different theoretical explanations in accounting for the urban wage premium along the wage distribution. We analyze the wage dynamics of migrants from low-to-high-density areas in Italy, using quantile regression and individual panel data to control for the sorting of workers. The results show that skilled workers enjoy a higher wage premium when they migrate (wage level effect), in line with the agglomeration externalities explanation, while unskilled workers benefit more from a wage premium accruing over time (wage growth effect). Further, investigating the determinants of the wage growth effect in greater depth, we find that for unskilled workers the wage growth is mainly due to human capital accumulation over time, consistently with the “learning” hypothesis, while for skilled workers it is the “coordination” hypothesis that matters.

Suggested Citation

  • Alessia Matano & Paolo Naticchioni, 2012. "What Drives the Urban Wage Premium? Evidence along the Wage Distribution," Working Papers - Dipartimento di Economia 13-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2012.
    • Handle: RePEc:des:wpaper:23
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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