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Wage Premia in Employment Clusters: Does Worker Sorting Bias Estimates?

  • Shihe Fu

    (Southwestern University of Finance and Economics (China))

  • Stephen L. Ross

    (University of Connecticut)

This paper tests whether the correlation between wages and the spatial concentration of employment can be explained by unobserved worker productivity differences. Residential location is used as a proxy for a worker's unobserved productivity, and average workplace commute time is used to test whether location based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census Long Form find that the agglomeration estimates are robust to comparisons within residential location and that the estimates do not persist after controlling for commutes suggesting that the productivity differences across locations are due to agglomeration, rather than productivity differences across individuals.

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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2007-26.

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Length: 55 pages
Date of creation: Jun 2007
Date of revision: Dec 2009
Handle: RePEc:uct:uconnp:2007-26
Note: The authors are grateful to Elizabeth Ananat, Richard Arnott, Patrick Bayer, Nate Baum-Snow, Dan Black, Keith Chen, Steven Durlauf, Hanming Fang, Li Gan, Vernon Henderson, Bill Kerr, Patrick Kline, Barry Nalebuff, Derek Neal, Francois Ortalo-Magne, Eleanora Patacchini, Stuart Rosenthal, Yona Rubinstein, Christopher Tabor, Bill Wheaton, and Siqi Zheng for their thoughtful comments and conversation. The authors also wish to thank seminar participants at the Brown Urban Economics Lunch, Duke Applied Microeconomics Seminar, Yale Applied Micro Summer Lunch, MIT Real Estate Seminar, Peking University, Institute for Real Estate Studies at Tsinghua University, and Southwestern University of Finance and Economics (China), the University of Wisconsin Labor Workshop, and conference participants at the 2006 North American Regional Science Association, 2007 International Symposium on Contemporary Labor Economics at Xiamen University and the 2008 American Economic Association meetings. Shihe Fu gratefully acknowledges the financial support from the China Scholarship Council. The research in this paper was conducted while the authors were Special Sworn Status researchers of the US Census Bureau at the Boston Census Research Data Center (BRDC). Research results and conclusions expressed are our own and do not necessarily reflect the views of the Census Bureau. This paper has been screened to insure that no confidential data are revealed.
Contact details of provider: Postal: University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/

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