Wages and the City - Evidence from Italy

Centro Studi Luca d'Agliano Development Studies Working Paper No. 231

29 Pages Posted: 25 Jul 2007

See all articles by Sabrina Lucia Di Addario

Sabrina Lucia Di Addario

Bank of Italy

Eleonora Patacchini

Einaudi Institute for Economics and Finance (EIEF) ; IZA Institute of Labor Economics

Date Written: May 2007

Abstract

We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy's Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets, we test whether the structure of wages varies with urban scale. We find that every additional 100,000 inhabitants in the local labor market raises earnings by 0.1 percent. The use of a geographical approach enables us to state that this effect decays very rapidly with distance, losing significance beyond approximately 12 kilometers. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to worker supervisors and office workers.

Keywords: Urbanization, Agglomeration externalities, Population clustering, Worker mobility

JEL Classification: R12, J31, J24, O15

Suggested Citation

Di Addario, Sabrina Lucia and Patacchini, Eleonora, Wages and the City - Evidence from Italy (May 2007). Centro Studi Luca d'Agliano Development Studies Working Paper No. 231, Available at SSRN: https://ssrn.com/abstract=1002632 or http://dx.doi.org/10.2139/ssrn.1002632

Sabrina Lucia Di Addario (Contact Author)

Bank of Italy ( email )

Via 20 settembre, 97/e
00187 Rome, I - 00184
Italy
+39 06 4792 3458 (Phone)
+39 06 4792 5626 (Fax)

HOME PAGE: http://sites.google.com/site/sabrinadiaddario/

Eleonora Patacchini

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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