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What Drives the Urban Wage Premium? Evidence along the Wage Distribution

Author

Listed:
  • Alessia Matano

    (Faculty of Economics, University of Barcelona)

  • Paolo Naticchioni

    (University of Cassino, University of Rome “La Sapienza”, CeLEG-Luiss)

Abstract

This paper aims at disentangling the role played by different theoretical explanations in accounting for the urban wage premium along the wage distribution. We analyze the wage dynamics of migrants from low-to-high-density areas in Italy, using quantile regression and individual panel data to control for the sorting of workers. The results show that skilled workers enjoy a higher wage premium when they migrate (wage level effect), in line with the agglomeration externalities explanation, while unskilled workers benefit more from a wage premium accruing over time (wage growth effect). Further, investigating the determinants of the wage growth effect in greater depth, we find that for unskilled workers the wage growth is mainly due to human capital accumulation over time, consistently with the “learning” hypothesis, while for skilled workers it is the “coordination” hypothesis that matters..

Suggested Citation

  • Alessia Matano & Paolo Naticchioni, 2012. "What Drives the Urban Wage Premium? Evidence along the Wage Distribution," AQR Working Papers 201202, University of Barcelona, Regional Quantitative Analysis Group, revised Feb 2012.
    • Handle: RePEc:aqr:wpaper:201202
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    More about this item

    Keywords

    Urban Wage Premium; Human Capital; Spatial Sorting; Wage Distribution; Quantile Fixed Effects. JEL classification: J31; J61; R23;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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