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

  • Alessia Matano


    (Faculty of Economics, University of Barcelona)

  • Paolo Naticchioni


    (University of Cassino, University of Rome “La Sapienza”, CeLEG-Luiss)

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..

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Paper provided by University of Barcelona, Research Institute of Applied Economics in its series IREA Working Papers with number 201203.

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Length: 34 pages
Date of creation: Jan 2012
Date of revision: Feb 2012
Handle: RePEc:ira:wpaper:201203
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