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Wage Premia in Employment Clusters: How Important is Worker Heterogeneity?

Author

Listed:
  • Shihe Fu

    (Southwestern University of Finance and Economics and Cheung Kong Graduate School of Business)

  • Stephen Ross

    (University of Connecticut)

Abstract

This paper tests whether the correlation between wages and the spatial concentration of employment can be explained by unobserved worker productivity differences. Residential location is used as a proxy for a worker's unobserved productivity, and average workplace commute time is used to test whether location-based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census Long Form find that the agglomeration estimates are robust to comparisons within residential location and that the estimates do not persist after controlling for commuting costs suggesting that the productivity differences across locations are not due to productivity differences across individuals.

Suggested Citation

  • Shihe Fu & Stephen Ross, 2010. "Wage Premia in Employment Clusters: How Important is Worker Heterogeneity?," Working Papers 2011-027, Human Capital and Economic Opportunity Working Group.
  • Handle: RePEc:hka:wpaper:2011-027
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    More about this item

    Keywords

    Agglomeration; Wages; Sorting; Locational Equilibrium; Human Capital Externalities;
    All these keywords.

    JEL classification:

    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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