Cities and Skills

35 Pages Posted: 30 Aug 2000  

Edward L. Glaeser

Harvard University - Department of Economics; Brookings Institution; National Bureau of Economic Research (NBER)

David C. Maré

Motu Economic and Public Policy Research Trust; University of Waikato - Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 1994

Abstract

This paper examines the productivity (and wage) gains from locating in dense, urban environments. We distinguish between three potential explanations of why firms are willing to pay urban workers more: (1) the urban wage premium is spurious and is the result of omitted ability measures, (2) the urban wage premium works because cities enhance productivity and (3) the urban wage premium is the result of faster skill accumulation in cities. Using a combination of standard regressions, individual fixed effects estimation (using migrants) and instrumental variables methods, we find that the urban wage premium does not represent omitted ability bias and it is only in part a level effect to productivity. The bulk of the urban wage premium accrues over time as a result of greater skill accumulation in cities.

Suggested Citation

Glaeser, Edward L. and Maré, David C., Cities and Skills (May 1994). NBER Working Paper No. w4728. Available at SSRN: https://ssrn.com/abstract=226994

Edward L. Glaeser (Contact Author)

Harvard University - Department of Economics ( email )

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David C. Maré

Motu Economic and Public Policy Research Trust ( email )

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University of Waikato - Economics

New Zealand

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