The urban wage premium in imperfect labour markets

Hirsch, Boris, Jahn, Elke J., Manning, Alan ORCID: 0000-0002-7884-3580 and Oberfichtner, Michael (2019) The urban wage premium in imperfect labour markets. CEP Discussion Papers (CEPDP1608). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

Using administrative data for West Germany, this paper investigates whether part of the urban wage premium stems from fierce competition in thick labour markets. We first establish that employers possess less wage-setting power in denser markets. Local differences in wage-setting power predict 1.8–2.1% higher wages from a 100 log points increase in population density. We further document that the observed urban wage premium from such an increase drops by 1.5–1.9pp once conditioning on local search frictions. Our results therefore suggest that a substantial part of the urban wage premium roots in differential imperfections across local labour markets.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2019 The Authors
Divisions:	Economics
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R23 - Regional Migration; Regional Labor Markets; Population J - Labor and Demographic Economics > J4 - Particular Labor Markets > J42 - Monopsony; Segmented Labor Markets J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
Date Deposited:	26 Nov 2019 11:12
Last Modified:	01 Oct 2024 03:19
URI:	http://eprints.lse.ac.uk/id/eprint/102629

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