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Wage growth, urbanization, and firm characteristics: Evidence for Germany

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  • Kelle, Markus

Abstract

I use German administrative data for 2001-2010 to analyse the impact of urbanization and firm characteristics on wage growth of workers. I find a statistically highly significant higher within-job wage growth rate for workers in counties with a higher population density. This provides evidence that workers' productivity growth is higher in denser regions, which could be explained by faster learning or human capital accumulation of workers. However, this effect turns insignificant once I account for the number of employees of the workers' firms, the share of highly educated workers in the firm and wagelevel firm fixed effects. This indicates that such a learning effect may occur rather within firms than between workers in a region. Beyond this, the paper presents evidence that workers in denser areas also benefit more from job changes within counties. One reason for that is that workers in denser regions match more often with high-wage firms. Furthermore, I find evidence that also the efficiency of the worker-firm matches is higher in denser areas.

Suggested Citation

  • Kelle, Markus, 2016. "Wage growth, urbanization, and firm characteristics: Evidence for Germany," Ruhr Economic Papers 631, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:631
    DOI: 10.4419/86788733
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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