Wage Premia in Employment Clusters: Agglomeration or Worker Heterogeneity?

56 Pages Posted: 18 Feb 2010

See all articles by Shihe Fu

Shihe Fu

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE)

Stephen L. Ross

University of Connecticut - Department of Economics

Date Written: February 1, 2010

Abstract

This paper tests whether the correlation between wages and the spatial concentration of employment can be explained by unobserved worker productivity differences. Residential location is used as a proxy for a worker’s unobserved productivity, and average workplace commute time is used to test whether location based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census Long Form find that the agglomeration estimates are robust to comparisons within residential location and that the estimates do not persist after controlling for commutes suggesting that the productivity differences across locations are due to agglomeration, rather than productivity differences across individuals.

Keywords: Agglomeration, Wages, Sorting, Locational Equilibrium, Human Capital Externalities

JEL Classification: R13, R30, J24, J31

Suggested Citation

Fu, Shihe and Ross, Stephen L., Wage Premia in Employment Clusters: Agglomeration or Worker Heterogeneity? (February 1, 2010). US Census Bureau Center for Economic Studies Paper No. CES-WP- 10-04. Available at SSRN: https://ssrn.com/abstract=1554342 or http://dx.doi.org/10.2139/ssrn.1554342

Shihe Fu (Contact Author)

Xiamen University - The Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 361005
China

Stephen L. Ross

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States
860-486-3533 (Phone)
860-486-4463 (Fax)

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