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Urban Density, Human Capital, and Productivity: An empirical analysis using wage data

  • MORIKAWA Masayuki

Numerous studies have indicated that densely populated cities enhance the productivity of workers through knowledge spillover and superior matching with employers in the labor market. This paper quantitatively analyzes the relationship among urban density, human capital, and wages by using micro data from the Basic Survey on Wage Structure for the years from 1990 to 2009. According to the estimation of standard wage functions augmented with population density, the agglomeration premium is larger for workers with higher observable skills such as education, tenure, and potential experience, which suggests rapid learning and superior matching in densely populated cities. Under structural changes such as a declining population and the trend toward a knowledge-based service economy, forming densely populated areas by facilitating the migration of workers has desirable effects throughout Japan on both individual wages and firm productivity.

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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11060.

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Length: 28 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:eti:dpaper:11060
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  1. Giordano Mion & Paolo Naticchioni, 2009. "The spatial sorting and matching of skills and firms," LSE Research Online Documents on Economics 42670, London School of Economics and Political Science, LSE Library.
  2. MORIKAWA Masayuki, 2008. "Economies of Density and Productivity in Service Industries: An Analysis of Personal-Service Industries Based on Establishment-Level Data," Discussion papers 08023, Research Institute of Economy, Trade and Industry (RIETI).
  3. Krashinsky, Harry, 2011. "Urban agglomeration, wages and selection: Evidence from samples of siblings," Labour Economics, Elsevier, vol. 18(1), pages 79-92, January.
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  7. Chul Chung & Jeremy Clark & Bonggeun Kim, 2008. "Is the Growing Skill Premium a Purely Metropolitan Issue?," Working Papers in Economics 08/10, University of Canterbury, Department of Economics and Finance.
  8. Christopher H. Wheeler, 2005. "Cities and the growth of wages among young workers: evidence from the NLSY," Working Papers 2005-055, Federal Reserve Bank of St. Louis.
  9. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
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  11. 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.
  12. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2010. "The Identification of Agglomeration Economies," CEPR Discussion Papers 8119, C.E.P.R. Discussion Papers.
  13. Richard Blundell & Lorraine Dearden & Costas Meghir & Barbara Sianesi, 1999. "Human capital investment: the returns from education and training to the individual, the firm and the economy," Fiscal Studies, Institute for Fiscal Studies, vol. 20(1), pages 1-23, March.
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  15. Christoffersen, Susan E.K. & Sarkissian, Sergei, 2009. "City size and fund performance," Journal of Financial Economics, Elsevier, vol. 92(2), pages 252-275, May.
  16. Wheeler, Christopher H, 2001. "Search, Sorting, and Urban Agglomeration," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 879-99, October.
  17. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
  18. Yankow, Jeffrey J., 2006. "Why do cities pay more? An empirical examination of some competing theories of the urban wage premium," Journal of Urban Economics, Elsevier, vol. 60(2), pages 139-161, September.
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