The urban wage growth premium: sorting or learning?

D'Costa, S. and Overman, H.G. 2014. The urban wage growth premium: sorting or learning? Regional Science and Urban Economics. 48, pp. 168-179. doi:10.1016/j.regsciurbeco.2014.06.006

TitleThe urban wage growth premium: sorting or learning?
TypeJournal article
AuthorsD'Costa, S. and Overman, H.G.
Abstract

This paper is concerned with the urban wage premium and addresses two central issues about which the field has not yet reached a consensus: first, the extent to which sorting of high ability individuals into urban areas explains the urban wage premium and second, whether workers receive this wage premium immediately, or through faster wage growth over time. Using a large panel of worker-level data from Britain, we first demonstrate the existence of an urban premium for wage levels, which increases in city size. We next provide evidence of a city size premium on wage growth, but show that this effect is driven purely by the increase in wage that occurs in the first year that a worker moves to a larger location. Controlling for sorting on the basis of unobservables we find no evidence of an urban wage growth premium. Experience in cities does have some impact on wage growth, however. Specifically, we show that workers who have at some point worked in a city experience faster wage growth than those who have never worked in a city.

JournalRegional Science and Urban Economics
Journal citation48, pp. 168-179
ISSN0166-0462
Year2014
PublisherElsevier
Digital Object Identifier (DOI)doi:10.1016/j.regsciurbeco.2014.06.006
Publication dates
Published in printSep 2014
Published05 Jul 2014
LicenseCC BY 3.0
File

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