Learning by Working in Big Cities

34 Pages Posted: 1 Feb 2013

See all articles by Jorge De la Roca

Jorge De la Roca

Furman Center for Real Estate and Urban Policy

Diego Puga

Centre for Monetary and Financial Studies (CEMFI)

Date Written: December 2012

Abstract

Individual earnings are higher in bigger cities. We consider three reasons: spatial sorting of initially more productive workers, static advantages associated with workers' current location, and learning by working in big cities. Using rich administrative data for Spain, we find that workers in bigger cities do not have higher unobserved initial ability, as reflected in individual fixed-effects. Instead, they obtain an immediate static premium while working in bigger cities and also accumulate more valuable experience, which increases their earnings faster. The additional value of experience accumulated in bigger cities persists even after workers move away and is even stronger for those with higher unobserved initial ability. This combination of effects explains both the higher mean and the greater dispersion of earnings in bigger cities.

Keywords: agglomeration economies, city size, earnings premium, learning

JEL Classification: J31, R10, R23

Suggested Citation

De la Roca, Jorge and Puga, Diego, Learning by Working in Big Cities (December 2012). CEPR Discussion Paper No. DP9243, Available at SSRN: https://ssrn.com/abstract=2210212

Jorge De la Roca

Furman Center for Real Estate and Urban Policy ( email )

139 MacDougal St, 2nd Floor
New York, NY 10012
United States
+1.212.998.6384 (Phone)

HOME PAGE: http://jorgedelaroca.name

Diego Puga

Centre for Monetary and Financial Studies (CEMFI) ( email )

Casado del Alisal 5
28014 Madrid
Spain

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