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The sources of the urban wage premium by worker skills: Spatial sorting or agglomeration economies?
Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE), Lund University.
Jönköping University, Jönköping International Business School, JIBS, Economics, Finance and Statistics.
Jönköping University, Jönköping International Business School, JIBS, Economics, Finance and Statistics.ORCID iD: 0000-0001-7432-7442
2014 (English)In: Papers in regional science (Print), ISSN 1056-8190, E-ISSN 1435-5957, Vol. 93, no 4, p. 727-747Article in journal (Refereed) Published
Abstract [en]

We estimate the respective importance of spatial sorting and agglomeration economies in explaining the urban wage premium for workers with different sets of skills. Sorting is the main source of the wage premium. Agglomeration economies are in general small, but are larger for workers with skills associated with non-routine job tasks. They also appear to involve human capital accumulation, as evidenced by the change in the wage of workers moving away from denser regions. For workers with routine jobs, agglomeration economies are virtually non-existent. Our results provide further evidence of spatial density bringing about productivity advantages primarily in contexts when problem-solving and interaction with others are important.

Place, publisher, year, edition, pages
2014. Vol. 93, no 4, p. 727-747
Keyword [en]
Spatial sorting, agglomeration economies, learning, skills, spatial wage disparities, density, innovation
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-22969DOI: 10.1111/pirs.12025OAI: oai:DiVA.org:hj-22969DiVA, id: diva2:684046
Available from: 2014-01-07 Created: 2014-01-07 Last updated: 2018-01-10Bibliographically approved
In thesis
1. Nonmarket Interactions and Density Externalities
Open this publication in new window or tab >>Nonmarket Interactions and Density Externalities
2014 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The four individual papers in this thesis all explore some aspect of the relationship between productivity and the density of economic activity.

The first paper (co-authored with Martin Andersson, and Johan Klaesson) establishes the general relationship between regional density and average labor productivity; a relationship that is particularly strong for workers in interactive professions. In the paper, we also caution that much of the observed differences are not causal effects of density, but driven by sorting of actors to

dense environments.

Paper number two (co-authored with Martin Andersson, and Johan Klaesson) addresses the attenuation of density externalities with space. Using data on the neighborhood-level, and information on first- and second-order neighboring areas, we conclude that the neighborhood effects are stronger for highly educated workers, and that the attenuation of the effect is sharp.

In the third paper, I estimate an individual-level wage equation to assess appropriate levels of aggregation when analyzing density externalities. I conclude that failure to use data on the neighborhood level will severely understate the  benefits of working in the central parts of modern cities.

The fourth paper departs from the conclusions of the previous chapters, and asks whether firms position themselves to benefit from density externalities. Judging by job switching patterns, the attenuation of density externalities are a real issue for the metropolitan workforce. Employees, especially those in interactive professions, tend to move short distances between employers, consistent with clustering to take advantage of significant but sharply attenuating human capital externalities.

Place, publisher, year, edition, pages
Jönköping: Jönköping International Business School, 2014. p. 170
Series
JIBS Dissertation Series, ISSN 1403-0470 ; 096
National Category
Economics and Business
Identifiers
urn:nbn:se:hj:diva-23661 (URN)978-91-86345-51-8 (ISBN)
Public defence
2014-04-11, B1014, Jönköping, 10:00 (English)
Opponent
Supervisors
Available from: 2014-03-31 Created: 2014-03-31 Last updated: 2014-03-31Bibliographically approved

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