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Cities and Skills

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  • Edward L. Glaeser
  • David C. Mare

Abstract

This paper examines the productivity (and wage) gains from locating in dense, urban environments. We distinguish between three potential explanations of why firms are willing to pay urban workers more: (1) the urban wage premium is spurious and is the result of omitted ability measures, (2) the urban wage premium works because cities enhance productivity and (3) the urban wage premium is the result of faster skill accumulation in cities. Using a combination of standard regressions, individual fixed effects estimation (using migrants) and instrumental variables methods, we find that the urban wage premium does not represent omitted ability bias and it is only in part a level effect to productivity. The bulk of the urban wage premium accrues over time as a result of greater skill accumulation in cities.

Suggested Citation

  • Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4728
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    More about this item

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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