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Wage Premia in Employment Clusters: Does Worker Sorting Bias Estimates?

Author

Listed:
  • Shihe Fu

    (Southwestern University of Finance and Economics (China))

  • Stephen L. Ross

    (University of Connecticut)

Abstract

This paper tests whether the correlation between wages and the spatial concentration of employment can be explained by unobserved worker productivity differences. Residential location is used as a proxy for a worker's unobserved productivity, and average workplace commute time is used to test whether location based productivity differences are compensated away by longer commutes. Analyses using confidential data from the 2000 Decennial Census Long Form find that the agglomeration estimates are robust to comparisons within residential location and that the estimates do not persist after controlling for commutes suggesting that the productivity differences across locations are due to agglomeration, rather than productivity differences across individuals.

Suggested Citation

  • Shihe Fu & Stephen L. Ross, 2007. "Wage Premia in Employment Clusters: Does Worker Sorting Bias Estimates?," Working papers 2007-26, University of Connecticut, Department of Economics, revised Dec 2009.
    • Handle: RePEc:uct:uconnp:2007-26
    Note: The authors are grateful to Elizabeth Ananat, Richard Arnott, Patrick Bayer, Nate Baum-Snow, Dan Black, Keith Chen, Steven Durlauf, Hanming Fang, Li Gan, Vernon Henderson, Bill Kerr, Patrick Kline, Barry Nalebuff, Derek Neal, Francois Ortalo-Magne, Eleanora Patacchini, Stuart Rosenthal, Yona Rubinstein, Christopher Tabor, Bill Wheaton, and Siqi Zheng for their thoughtful comments and conversation. The authors also wish to thank seminar participants at the Brown Urban Economics Lunch, Duke Applied Microeconomics Seminar, Yale Applied Micro Summer Lunch, MIT Real Estate Seminar, Peking University, Institute for Real Estate Studies at Tsinghua University, and Southwestern University of Finance and Economics (China), the University of Wisconsin Labor Workshop, and conference participants at the 2006 North American Regional Science Association, 2007 International Symposium on Contemporary Labor Economics at Xiamen University and the 2008 American Economic Association meetings. Shihe Fu gratefully acknowledges the financial support from the China Scholarship Council. The research in this paper was conducted while the authors were Special Sworn Status researchers of the US Census Bureau at the Boston Census Research Data Center (BRDC). Research results and conclusions expressed are our own and do not necessarily reflect the views of the Census Bureau. This paper has been screened to insure that no confidential data are revealed.
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    Cited by:

    1. Arnott, Richard, 2007. "Congestion tolling with agglomeration externalities," Journal of Urban Economics, Elsevier, vol. 62(2), pages 187-203, September.
    2. Oliver Falck & Christina Guenther & Stephan Heblich & William R. Kerr, 2013. "From Russia with love: the impact of relocated firms on incumbent survival," Journal of Economic Geography, Oxford University Press, vol. 13(3), pages 419-449, May.
    3. William R. Kerr & Scott Duke Kominers, 2015. "Agglomerative Forces and Cluster Shapes," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 877-899, October.
    4. Arnott, Richard & Shevyakhova, Elizaveta, 2014. "Tenancy rent control and credible commitment in maintenance," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 72-85.
    5. Di Addario, Sabrina & Patacchini, Eleonora, 2008. "Wages and the City. Evidence from Italy," Labour Economics, Elsevier, vol. 15(5), pages 1040-1061, October.
    6. Arnott, Richard & Rowse, John, 2009. "Downtown parking in auto city," Regional Science and Urban Economics, Elsevier, vol. 39(1), pages 1-14, January.

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    More about this item

    Keywords

    Agglomeration; Wages; Sorting; Locational Equilibrium; Human Capital;
    All these keywords.

    JEL classification:

    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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