Learning by working in big cities

Diego Puga and Jorge De la Roca

No 9243, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Individual earnings are higher in bigger cities. We consider three reasons: spatial sorting of initially more productive workers, static advantages associated with workers' current location, and learning by working in big cities. Using rich administrative data for Spain, we find that workers in bigger cities do not have higher unobserved initial ability, as reflected in individual fixed-effects. Instead, they obtain an immediate static premium while working in bigger cities and also accumulate more valuable experience, which increases their earnings faster. The additional value of experience accumulated in bigger cities persists even after workers move away and is even stronger for those with higher unobserved initial ability. This combination of effects explains both the higher mean and the greater dispersion of earnings in bigger cities.

Keywords: Agglomeration economies; City size; Earnings premium; Learning (search for similar items in EconPapers)
JEL-codes: J31 R10 R23 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-geo, nep-lab, nep-lma and nep-ure
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Citations: View citations in EconPapers (48)

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Related works:
Journal Article: Learning by Working in Big Cities (2017)
Working Paper: Learning by Working in Big Cities (2016)
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