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City of dreams

De la Roca, Jorge, Ottaviano, Gianmarco I. P. and Puga, Diego (2014) City of dreams. CEP Discussion Papers (CEPDP1305). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone, and yet there is little sorting on ability. A possible explanation is that young individuals have an imperfect assessment of their ability, and, when they learn about it, early decisions have had a lasting impact and reduce their incentives to move. We formalize this idea through an overlapping generations model of urban sorting by workers with heterogenous ability and self-confidence, with the latter defined as individuals’ assessment of their own ability. We then test the location patterns predicted by the model over the life cycle on panel data from the National Longitudinal Survey of Youth 1979. We find that the city-size choices of individuals at different stages vary with ability and self-confidence in a way that closely matches our theoretical predictions.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2014 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R10 - General
R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R23 - Regional Migration; Regional Labor Markets; Population
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 16 Dec 2014 12:55
Last Modified: 14 Jul 2019 23:34
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/60525

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