Seminar: "Why do wages grow faster in urban areas? An empirical investigation of the role of spatial sorting"
Tuesday February 6th 2018 Paul Verstraten (CPB) will give a presentation titled "Why do wages grow faster in urban areas? An empirical investigation of the role of spatial sorting".
The existence of an urban wage growth premium is a well-established empirical fact. This article challenges the conventional view that faster wage growth for urban workers is mainly caused by human capital spillovers. Instead, we find that the positive association between city size and wage growth is to a great extent driven by sorting of workers and firms, with inherently higher wage growth, into bigger cities. Having controlled for spatial sorting, we conclude that only young workers experience significant urban wage growth benefits. Wage level benefits of urban areas are important to all types of workers, especially the highly educated.