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City of dreams

Author

Listed:
  • De la Roca, Jorge
  • Ottaviano, Gianmarco I. P.
  • Puga, Diego

Abstract

Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone, and yet there is little sorting on ability. A possible explanation is that 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 heterogenous ability and self-confidence, with the latter defined as individuals’ assessment of their own ability. We then test the location patterns predicted by the model over the life cycle on panel data from the National Longitudinal Survey of Youth 1979. We find that the city-size choices of individuals at different stages vary with ability and self-confidence in a way that closely matches our theoretical predictions.

Suggested Citation

  • De la Roca, Jorge & Ottaviano, Gianmarco I. P. & Puga, Diego, 2014. "City of dreams," LSE Research Online Documents on Economics 60525, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:60525
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    File URL: http://eprints.lse.ac.uk/60525/
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    References listed on IDEAS

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    Cited by:

    1. 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.
    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.

    More about this item

    Keywords

    Cities; sorting; agglomeration; self-confidence; learning;

    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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