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The supply and demand of skilled workers in cities and the role of industry composition

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  • Jeffrey Brinkman

Abstract

The share of high-skilled workers in U.S. cities is positively correlated with city size, and this correlation strengthened between 1980 and 2010. Furthermore, during the same time period, the U.S. economy experienced a significant structural transformation with regard to industrial composition, most notably in the decline of manufacturing and the rise of high-skilled service industries. To decompose and investigate these trends, this paper develops and estimates a spatial equilibrium model with heterogeneous firms and workers that allows for both industry-specific and skill-specific technology changes across cities. The estimates imply that both supply and demand of high-skilled labor have increased over time in big cities. In addition, demand for skilled labor in large cities has increased somewhat within all industries. However, this aggregate increase in skill demand in cities is highly concentrated in a few industries. The finance, insurance, and real estate sectors alone account for 35 percent of the net change over time.

Suggested Citation

  • Jeffrey Brinkman, 2014. "The supply and demand of skilled workers in cities and the role of industry composition," Working Papers 14-32, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:14-32
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    Cited by:

    1. Haixiao Wu, 2018. "Is There a Kuznets Curve for Intra-City Earnings Inequality?," Working Papers 2018-09, The George Washington University, Institute for International Economic Policy.
    2. Jeffrey Brinkman, 2015. "Big cities and the highly educated: what's the connection," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 10-15.
    3. Broxterman, Daniel A. & Yezer, Anthony M., 2015. "Why does skill intensity vary across cities? The role of housing cost," Regional Science and Urban Economics, Elsevier, vol. 55(C), pages 14-27.

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    More about this item

    Keywords

    Production; Amenities; Cities; Skilled labor;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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