Understanding the City Size Wage Gap
It is widely documented that wages are higher in larger cities. This relationship is robust to controls for age, schooling and labor market experience. This paper investigates the causes of the city size wage gap. In particular, we propose a unified framework for empirically investigating the extent to which selection on underlying productivity or ability, firm-worker matching and human capital spillovers can account for observed differences in wages between large and small cities. Our analysis utilizes a model of job search that incorporates endogenous migration between large and small cities. This model is rich enough to allow for recovery of the underlying ability distributions of workers by city size, arrival rates of job offers by ability and location, and returns to experience by ability and location, when structurally estimated using longitudinal data. These estimates facilitate a more complete empirical decomposition of the city size wage gap than is possible using results in existing research and produce new empirical evidence on the relative importance of various mechanisms by which larger cities are more productive.
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- Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2014.
"The Economics of Density: Evidence from the Berlin Wall,"
NBER Working Papers
20354, National Bureau of Economic Research, Inc.
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- Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2012. "The Economics of Density: Evidence from the Berlin Wall," CEP Discussion Papers dp1154, Centre for Economic Performance, LSE.
- Ahlfeldt, Gabriel & Redding, Stephen J. & Sturm, Daniel M & Wolf, Nikolaus, 2014. "The Economics of Density: Evidence from the Berlin Wall," CEPR Discussion Papers 10097, C.E.P.R. Discussion Papers.
- Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel Sturm & Nikolaus Wolf, 2012. "The economics of density: evidence from the Berlin wall," LSE Research Online Documents on Economics 58600, London School of Economics and Political Science, LSE Library.
- Sturm, Daniel & Ahlfeldt, Gabriel & Redding, Stephen & Wolf, Nikolaus, 2013. "The Economics of Density: Evidence from the Berlin Wall," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79873, Verein für Socialpolitik / German Economic Association.
- Alessia Matano & Paolo Naticchioni, 2009. "Wage distribution and the spatial sorting of workers and firms," Working Papers - Dipartimento di Economia 8-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
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