Abstract

http://ssrn.com/abstract=1724583
 
 

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Spatial Sorting: Why New York, Los Angeles and Detroit Attract the Greatest Minds as Well as the Unskilled


Jan Eeckhout


University College London - Department of Economics

Roberto B. Pinheiro


University of Colorado at Boulder - Department of Finance

Kurt Schmidheiny


Universitat Pompeu Fabra; Universität Basel

December 13, 2010

CESifo Working Paper Series No. 3274

Abstract:     
We propose a theory of skill mobility across cities. It predicts the well documented city size-wage premium: the wage distribution in large cities first-order stochastically dominates that in small cities. Yet, because this premium is reflected in higher house prices, this does not necessarily imply that this stochastic dominance relation also exists in the distribution of skills. Instead, we find there is second-order stochastic dominance in the skill distribution. The demand for skills is non-monotonic as our model predicts a “Sinatra” as well as an “Eminem” effect: both the very high and the very low skilled disproportionately sort into the biggest cities, while those with medium skill levels sort into small cities. The pattern of spatial sorting is explained by a technology with a varying elasticity of substitution that is decreasing in skill density. Using CPS data on wages and Census data on house prices, we find that this technology is consistent with the observed patterns of skills.

Number of Pages in PDF File: 48

Keywords: matching theory, sorting, general equilibrium, population dynamics, cities, wage distribution

JEL Classification: J31, R10, R23

working papers series


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Date posted: December 14, 2010  

Suggested Citation

Eeckhout, Jan and Pinheiro, Roberto B. and Schmidheiny, Kurt, Spatial Sorting: Why New York, Los Angeles and Detroit Attract the Greatest Minds as Well as the Unskilled (December 13, 2010). CESifo Working Paper Series No. 3274. Available at SSRN: http://ssrn.com/abstract=1724583

Contact Information

Jan Eeckhout
University College London - Department of Economics ( email )
30 Gordon Street
London WC1E 6BT, WC1H 0AX
United Kingdom
Roberto B. Pinheiro
University of Colorado at Boulder - Department of Finance ( email )
Campus Box 419
Boulder, CO 80309
United States
Kurt Schmidheiny (Contact Author)
Universitat Pompeu Fabra ( email )
Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
+34 93 542 2682 (Phone)
HOME PAGE: http://research.schmidheiny.name/
Universität Basel ( email )
Wirtschaftswissenschaftliche Fakultät
Peter Merian-Weg 6
Basel, CH-4003
Switzerland
HOME PAGE: http://wwz.unibas.ch/schmidheiny/
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