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The urban wage growth premium: sorting or learning?

D'Costa, Sabine and Overman, Henry G. (2014) The urban wage growth premium: sorting or learning? Regional Science and Urban Economics, 48 . pp. 168-179. ISSN 0166-0462

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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.

Item Type: Article
Official URL: http://www.sciencedirect.com/science/journal/01660...
Additional Information: © 2014 The Authors
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R23 - Regional Migration; Regional Labor Markets; Population
Sets: Departments > Geography and Environment
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Research centres and groups > What Works Centre for Local Economic Growth (WWG)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Funders: Economic and Social Research Council
Projects: ES/J021342/1
Date Deposited: 19 Aug 2014 09:43
URL: http://eprints.lse.ac.uk/59074/

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