IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/243.html
   My bibliography  Save this paper

Wages and the City. The Italian case

Author

Listed:
  • Sabrina Di Addario
  • Eleonora Patacchini

Abstract

We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy`s Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed to 242 randomly drawn local labor markets (30 percent of the total), we test whether the structure of wages varies with urban scale. We find that every additional 100 employees per square kilometer (100,000 inhabitants) in the local labor market raises earnings by 0.4-0.6 percent (0.1 percent) and that employees working in large cities earn, on average, 2-3 percent higher wages than those in the rest of the economy. The application of spatial data analysis techniques enables us to state that this effect is present only in the large cities surrounded by low-populated areas. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to managers, worker supervisors, and office workers.

Suggested Citation

  • Sabrina Di Addario & Eleonora Patacchini, 2005. "Wages and the City. The Italian case," Economics Series Working Papers 243, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:243
    as

    Download full text from publisher

    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper243.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    2. repec:aia:aiaswp:wp22 is not listed on IDEAS
    3. Combes, Pierre-Philippe & Duranton, Gilles, 2006. "Labour pooling, labour poaching, and spatial clustering," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 1-28, January.
    4. Diamond, Charles A & Simon, Curtis J, 1990. "Industrial Specialization and the Returns to Labor," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 175-201, April.
    5. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
    6. Sascha O. Becker & Andrea Ichino & Giovanni Peri, 2004. "How Large Is the "Brain Drain" from Italy?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(1), pages 1-32, April.
    7. Moomaw, Ronald L., 1983. "Is population scale a worthless surrogate for business agglomeration economies?," Regional Science and Urban Economics, Elsevier, vol. 13(4), pages 525-545, November.
    8. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
    9. Sabrina Di Addario, 2005. "Job Search in Thick Markets: Evidence from Italy," Economics Series Working Papers 235, University of Oxford, Department of Economics.
    10. Carlo Dell'Aringa & Claudio Lucifora & Federica Origo, 2007. "Public Sector Pay And Regional Competitiveness. A First Look At Regional Public-Private Wage Differentials In Italy," Manchester School, University of Manchester, vol. 75(4), pages 445-478, July.
    11. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
    12. Antonio Ciccone & Giovanni Peri, "undated". "Human Capital and Externalities in Cities," Working Papers 172, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    13. Margaret Stevens, 2003. "Earnings Functions, Specific Human Capital, and Job Matching: Tenure Bias Is Negative," Journal of Labor Economics, University of Chicago Press, vol. 21(4), pages 783-806, October.
    14. Beffy, Magali & Buchinsky, Mosche & Fougère, Denis & Kamionka, Thierry & Kramarz, Francis, 2006. "The Returns to Seniority in France (and Why are They Lower than in the United States?)," CEPR Discussion Papers 5486, C.E.P.R. Discussion Papers.
    15. Brunello, Giorgio, 2001. "On the Complementarity between Education and Training in Europe," IZA Discussion Papers 309, Institute for the Study of Labor (IZA).
    16. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    17. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
    18. Curtis J. Simon, 1988. "Frictional Unemployment and the Role of Industrial Diversity," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 715-728.
    19. Charles I. Jones, 2002. "Sources of U.S. Economic Growth in a World of Ideas," American Economic Review, American Economic Association, vol. 92(1), pages 220-239, March.
    20. repec:fth:prinin:343 is not listed on IDEAS
    21. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    22. Glaeser, Edward L., 1999. "Learning in Cities," Journal of Urban Economics, Elsevier, vol. 46(2), pages 254-277, September.
    23. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
    24. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
    25. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, vol. 22(9), pages 1325-1343, September.
    26. Tabuchi, Takatoshi & Yoshida, Atsushi, 2000. "Separating Urban Agglomeration Economies in Consumption and Production," Journal of Urban Economics, Elsevier, vol. 48(1), pages 70-84, July.
    27. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    28. Dwight W. Adamson & David E. Clark & Mark D. Partridge, 2004. "Do Urban Agglomeration Effects and Household Amenities have a Skill Bias?," Journal of Regional Science, Wiley Blackwell, vol. 44(2), pages 201-224.
    29. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    30. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281-281.
    31. Trostel, Philip & Walker, Ian & Woolley, Paul, 2002. "Estimates of the economic return to schooling for 28 countries," Labour Economics, Elsevier, vol. 9(1), pages 1-16, February.
    32. Kim, Sunwoong, 1990. "Labor heterogeneity, wage bargaining, and agglomeration economies," Journal of Urban Economics, Elsevier, vol. 28(2), pages 160-177, September.
    33. Federico Cingano & Fabiano Schivardi, 2004. "Identifying the Sources of Local Productivity Growth," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 720-742, June.
    34. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-562, October.
    35. Moretti, Enrico, 2004. "Human capital externalities in cities," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 51, pages 2243-2291 Elsevier.
    36. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    37. Gyourko, Joseph & Kahn, Matthew & Tracy, Joseph, 1999. "Quality of life and environmental comparisons," Handbook of Regional and Urban Economics,in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 37, pages 1413-1454 Elsevier.
    38. Wheaton, William C. & Lewis, Mark J., 2002. "Urban Wages and Labor Market Agglomeration," Journal of Urban Economics, Elsevier, vol. 51(3), pages 542-562, May.
    39. Roland Benabou, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 619-652.
    40. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
    41. Marco Bellandi & Lisa De Propris, 2012. "Small Firms and Industrial Districts," Chapters,in: Handbook on the Economics and Theory of the Firm, chapter 27 Edward Elgar Publishing.
    42. Adriaan S. Kalwij & Mary Gregory, 2005. "A panel data analysis of the effects of wages, standard hours and unionization on paid overtime work in Britain," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(1), pages 207-231.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sabrina Di Addario & Eleonora Patacchini, 2006. "Is there an urban wage premium in Italy?," Temi di discussione (Economic working papers) 570, Bank of Italy, Economic Research and International Relations Area.
    2. Eleonora Patacchini, 2008. "Local analysis of economic disparities in Italy: a spatial statistics approach," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 17(1), pages 85-112, February.

    More about this item

    Keywords

    Wage Differentials; Urbanization; Agglomeration Externalities; Population Clustering; Spatial Autocorrelation;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:243. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anne Pouliquen). General contact details of provider: http://edirc.repec.org/data/sfeixuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.