Are the best jobs created in largest cities? Evidence from Italy 1993-2016

The gap in the employment dynamics between larger urban areas and other areas has widened dramatically in recent decades in advanced economies. A proposed explanation for this trend argues that the technological change occurs with greater intensity in larger urban areas than in medium and small cities, since it interacts with the urban agglomeration forces. In particular, more qualified, better paid jobs are expected to grow more in larger cities. This work focuses on the dynamics of most paying jobs and their spatial distribution across different-size cities in Italy in the period between 1993 and 2016. We investigate whether their share has grown and whether its growth has actually been concentrated in the larger cities. Using Bank of Italy’s Survey of Household Income and Wealth (SHIW), we find that the share of most paying jobs has increased in aggregate but its growth in large cities was much weaker than in medium and small cities and even negative after 2008. We also estimate a probit IV model of the worker’s probability of being employed in a most paying job across cities. The results show that being in a bigger city does not increase the chances of getting a better paid job. Furthermore, a shift-share decomposition reveals that the weak growth of most paying jobs in larger cities is only partly explained by the sectoral shifts. Our evidence can be explained by the slow diffusion of new technologies in the Italian economy. Moreover, it is consistent with studies showing the poor performance of the largest urban economies in Italy.