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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
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    References listed on IDEAS

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    1. Pierre‐Philippe Combes & Gilles Duranton & Laurent Gobillon & Diego Puga & Sébastien Roux, 2012. "The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection," Econometrica, Econometric Society, vol. 80(6), pages 2543-2594, November.
    2. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 967-1015.
    3. D'Costa, Sabine & Overman, Henry G., 2014. "The urban wage growth premium: Sorting or learning?," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 168-179.
    4. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    5. Vom Berge, Philipp & König, Marion & Seth, Stefan, 2013. "Sample of Integrated Labour Market Biographies (SIAB) 1975-2010," FDZ Datenreport. Documentation on Labour Market Data 201301_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    6. Jorge De La Roca & Diego Puga, 2017. "Learning by Working in Big Cities," Review of Economic Studies, Oxford University Press, vol. 84(1), pages 106-142.
    7. Yankow, Jeffrey J., 2006. "Why do cities pay more? An empirical examination of some competing theories of the urban wage premium," Journal of Urban Economics, Elsevier, vol. 60(2), pages 139-161, September.
    8. Wheeler, Christopher H., 2006. "Cities and the growth of wages among young workers: Evidence from the NLSY," Journal of Urban Economics, Elsevier, vol. 60(2), pages 162-184, September.
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    11. Stephani, Jens, 2013. "Does it matter where you work? : employer characteristics and the wage growth of low-wage workers and higher-wage workers," IAB Discussion Paper 201304, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Charles Brown & James L. Medoff, 2003. "Firm Age and Wages," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 677-698, July.
    13. Philipp Ehrl, 2014. "High-wage workers and high-productivity firms - a regional view on matching in Germany," Working Papers 149, Bavarian Graduate Program in Economics (BGPE).
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    More about this item

    Keywords

    wage growth; learning; urbanization; firm characteristics;

    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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