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Spatial Sorting: Why New York, Los Angeles and Detroit attract the greatest minds as well as the unskilled

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  • Eeckhout, Jan
  • Schmidheiny, Kurt
  • Pinheiro, Roberto

Abstract

We propose a theory of skill mobility across cities. It predicts the well documented city size--wage premium: the wage distribution in large cities first-order stochastically dominates that in small cities. Yet, because this premium is reflected in higher house prices, this does not necessarily imply that this stochastic dominance relation also exists in the distribution of skills. Instead, we find there is second-order stochastic dominance in the skill distribution. The demand for skills is non-monotonic as our model predicts a ``Sinatra'' as well as an ``Eminem'' effect: both the very high and the very low skilled disproportionately sort into the biggest cities, while those with medium skill levels sort into small cities. The pattern of spatial sorting is explained by a technology with a varying elasticity of substitution that is decreasing in skill density. Using CPS data on wages and Census data on house prices, we find that this technology is consistent with the observed patterns of skills.

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  • Eeckhout, Jan & Schmidheiny, Kurt & Pinheiro, Roberto, 2010. "Spatial Sorting: Why New York, Los Angeles and Detroit attract the greatest minds as well as the unskilled," CEPR Discussion Papers 8151, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8151
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    Cited by:

    1. Donald R. Davis & Jonathan I. Dingel, 2019. "A Spatial Knowledge Economy," American Economic Review, American Economic Association, vol. 109(1), pages 153-170, January.
    2. Edivaldo C. Neves Jr & Carlos R. Azzoni, Andre Chagas, 2017. "Skill wage premium and city size," Working Papers, Department of Economics 2017_19, University of São Paulo (FEA-USP).
    3. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent & Roux, Sébastien, 2012. "Sorting and local wage and skill distributions in France," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 913-930.
    4. Suzanne Kok, 2014. "Matching worker skills to job tasks in the Netherlands: sorting into cities for better careers," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-36, December.
    5. Antonio Accetturo & Alberto Dalmazzo & Guido Blasio, 2014. "Skill Polarization In Local Labor Markets Under Share-Altering Technical Change," Journal of Regional Science, Wiley Blackwell, vol. 54(2), pages 249-272, March.
    6. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks, And Skills," Journal of Regional Science, Wiley Blackwell, vol. 54(5), pages 856-892, November.
    7. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks and Skills," CPB Discussion Paper 269.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Jorge De La Roca & Diego Puga, 2017. "Learning by Working in Big Cities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(1), pages 106-142.
    9. Rafael Alvarado & Miguel Atienza, 2014. "The role of market access and human capital in regional wage disparities: Empirical evidence for Ecuador," Documentos de Trabajo en Economia y Ciencia Regional 50, Universidad Catolica del Norte, Chile, Department of Economics, revised Mar 2014.
    10. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    11. Suzanne Kok, 2013. "Town and city jobs: Your job is different in another location," CPB Discussion Paper 246, CPB Netherlands Bureau for Economic Policy Analysis.
    12. Suzanne Kok & Bas ter Weel, 2014. "Cities, Tasks and Skills," CPB Discussion Paper 269, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Or Levkovich & Jan Rouwendal, 2014. "Location Choices of highly Educated Foreign Workers: the Importance of Urban Amenities," Tinbergen Institute Discussion Papers 14-093/VIII, Tinbergen Institute.
    14. Yuming Fu & Yang Hao, 2015. "An Urban Accounting for Geographic Concentration of Skills and Welfare Inequality," ERSA conference papers ersa15p734, European Regional Science Association.
    15. Xingwei Hu, 2020. "Sorting Big Data by Revealed Preference with Application to College Ranking," Papers 2003.12198, arXiv.org.

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    More about this item

    Keywords

    Matching theory; Sorting; General equilibrium; Population dynamics; Cities; Wage distribution;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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