The Supply and Demand of Skilled Workers in Cities and the Role of Industry Composition

40 Pages Posted: 29 Oct 2014

See all articles by Jeffrey Brinkman

Jeffrey Brinkman

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: October 20, 2014

Abstract

The share of high-skilled workers in U.S. cities is positively correlated with city size, and this correlation strengthened between 1980 and 2010. Furthermore, during the same time period, the U.S. economy experienced a significant structural transformation with regard to industrial composition, most notably in the decline of manufacturing and the rise of high-skilled service industries. To decompose and investigate these trends, this paper develops and estimates a spatial equilibrium model with heterogeneous firms and workers that allows for both industry-specific and skill-specific technology changes across cities. The estimates imply that both supply and demand of high-skilled labor have increased over time in big cities. In addition, demand for skilled labor in large cities has increased somewhat within all industries. However, this aggregate increase in skill demand in cities is highly concentrated in a few industries. The finance, insurance, and real estate sectors alone account for 35 percent of the net change over time.

Keywords: R12, J21, J61

JEL Classification: Production, Amenities, Cities, Skilled Labor

Suggested Citation

Brinkman, Jeffrey, The Supply and Demand of Skilled Workers in Cities and the Role of Industry Composition (October 20, 2014). FRB of Philadelphia Working Paper No. 14-32, Available at SSRN: https://ssrn.com/abstract=2515329 or http://dx.doi.org/10.2139/ssrn.2515329

Jeffrey Brinkman (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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