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Urban wage premium increasing with education level: Identification of agglomeration effects for Norway

Author

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  • Hildegunn Stokke
  • Jørn Rattsø
  • Fredrik Carlsen

Abstract

Income levels are higher in cities. The evidence for the income gap between urban and rural areas is overwhelming, but the agglomeration effect is hard to identify. Recent advances make use of individual level data to separate out sorting and instrumentation to handle the endogeneity of population density. We offer an analysis based on the whole working population in Norway with complete description of their education level. The data allow for estimation of the agglomeration effect for different education groups and the results show that agglomeration economies are increasing with education level. The elasticity of income with respect to population size and density is significantly lower for individuals with lower education. The result is robust to alternative instruments of urbanization and inclusion of amenity effects. JEL codes: J24, J31, J61, R12, R23 Key words: Agglomeration economies, urban wage premium, sorting, education groups

Suggested Citation

  • Hildegunn Stokke & Jørn Rattsø & Fredrik Carlsen, 2012. "Urban wage premium increasing with education level: Identification of agglomeration effects for Norway," ERSA conference papers ersa12p459, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa12p459
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    Cited by:

    1. D'Costa, Sabine & Overman, Henry G., 2014. "The urban wage growth premium: Sorting or learning?," Regional Science and Urban Economics, Elsevier, vol. 48(C), pages 168-179.
    2. Sabine D'Costa & Henry Overman, 2013. "The urban wage growth premium: evidence from British cities," ERSA conference papers ersa13p516, European Regional Science Association.
    3. 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).

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    More about this item

    Keywords

    agglomeration economies; urban wage premium; sorting; education groups;
    All these keywords.

    JEL classification:

    • 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
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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