Is There an Urban Wage Premium in Italy?

65 Pages Posted: 10 Apr 2006

See all articles by Sabrina Lucia Di Addario

Sabrina Lucia Di Addario

Bank of Italy

Eleonora Patacchini

Einaudi Institute for Economics and Finance (EIEF) ; IZA Institute of Labor Economics

Abstract

We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy's Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets (30 percent of the total), we test whether the structure of wages varies with urban scale. We find that every additional 100 employees per square kilometer (100,000 inhabitants) in the local labor market raises earnings by 0.4-0.6 percent (0.1 percent) and that employees working in large cities earn, on average, 2-3 percent higher wages than those in the rest of the economy. The application of spatial data analysis techniques enables us to state that this effect is present only in the large cities surrounded by low-populated areas. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to managers, worker supervisors, and office workers.

Keywords: Wage Differentials, Urbanization, Agglomeration Externalities, Population Clustering, Spatial Autocorrelation

JEL Classification: R12, J31

Suggested Citation

Di Addario, Sabrina Lucia and Patacchini, Eleonora, Is There an Urban Wage Premium in Italy?. Bank of Italy Economic Research Paper No. 570. Available at SSRN: https://ssrn.com/abstract=895503 or http://dx.doi.org/10.2139/ssrn.895503

Sabrina Lucia Di Addario (Contact Author)

Bank of Italy ( email )

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Italy
+39 06 4792 3458 (Phone)
+39 06 4792 5626 (Fax)

HOME PAGE: http://sites.google.com/site/sabrinadiaddario/

Eleonora Patacchini

Einaudi Institute for Economics and Finance (EIEF) ( email )

Via Due Macelli, 73
Rome, 00187
Italy

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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