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Ability sorting and consumer city

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  • Lee, Sanghoon

Abstract

This paper provides a consumption-side explanation for the urban wage premium. The paper shows that if the taste for consumption variety is a luxury good, high average wages in large cities can be due to the selection of high-skill workers choosing to live there. A unique implication is that urban wage premiums are decreasing in skills and can even be negative for very high-skill workers. I confirm this implication using data on the health care workers.

Suggested Citation

  • Lee, Sanghoon, 2010. "Ability sorting and consumer city," Journal of Urban Economics, Elsevier, vol. 68(1), pages 20-33, July.
    • Handle: RePEc:eee:juecon:v:68:y:2010:i:1:p:20-33
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