Wage Distribution and the Spatial Sorting of Workers and Firms

DE-ISFOL La Sapienza Discussion Paper

34 Pages Posted: 5 Feb 2010

See all articles by Alessia Matano

Alessia Matano

University of Rome I

Paolo Naticchioni

University of Rome I; University of Cassino

Date Written: February 5, 2010

Abstract

Spatial sorting plays an important role in accounting for disparities in average wages among locations. This paper shows that sorting also matters when addressing the relation between spatial externalities and wage distribution, i.e. across workers located at different percentiles of the wage distribution. Using Italian employer-employee panel data we can control for individual and firm heterogeneity as well as for unobserved individual heterogeneity by means of quantile fixed effects estimates. After controlling for the sorting of workers the spatial externality impacts dampen along the whole wage distribution and generally remain positive only in the upper tail. As for firm sorting, it becomes uniform along the wage distribution once individual fixed effects are considered. We also point out that the impact of worker sorting is not homogeneous across sectors: along the density dimension it occurs mainly in skill-intensive sectors, while along the specialization dimension it is concentrated in the unskill-intensive sectors.

Keywords: Spatial Externalities, Spatial Sorting, Wage Distribution, Quantile Fixed Effects

JEL Classification: J31, J61, R23, R30

Suggested Citation

Matano, Alessia and Naticchioni, Paolo, Wage Distribution and the Spatial Sorting of Workers and Firms (February 5, 2010). DE-ISFOL La Sapienza Discussion Paper. Available at SSRN: https://ssrn.com/abstract=1548643 or http://dx.doi.org/10.2139/ssrn.1548643

Alessia Matano

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

Paolo Naticchioni (Contact Author)

University of Rome I ( email )

Piazzale Aldo Moro 5
Roma, Rome 00185
Italy

University of Cassino ( email )

Cassino
Italy

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