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Wages and the City. The Italian case

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  • 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.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 243.

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Date of creation: 01 Aug 2005
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Handle: RePEc:oxf:wpaper:243
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Keywords: Wage Differentials; Urbanization; Agglomeration Externalities; Population Clustering; Spatial Autocorrelation;

Find related papers by 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

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Cited by:

  1. 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.
  2. 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.

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