Scandinavian Working Papers in Economics

Papers in Innovation Studies,
Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy

No 2014/6: The Sources of the Urban Wage Premium by Worker Skills

Martin Andersson (), Johan Klaesson () and Johan P Larsson ()
Additional contact information
Martin Andersson: CIRCLE, Lund University, Postal: CIRCLE, Lund University, PO Box 117, SE-22100 Lund, Sweden
Johan Klaesson: Department of Economics, Finance and Statistics, Jönköping International Business School
Johan P Larsson: Department of Economics, Finance and Statistics, Jönköping International Business School

Abstract: We estimate the respective importance of spatial sorting and agglomeration economies in explaining the urban wage premium for workers with different sets of skills. Sorting is the main source of the wage premium. Agglomeration economies are in general small, but are larger for workers with skills associated with non-routine job tasks. They also appear to involve human capital accumulation, as evidenced by the change in the wage of workers moving away from denser regions. For workers with routine jobs, agglomeration economies are virtually non-existent. Our results provide further evidence of spatial density bringing about productivity advantages primarily in contexts when problem-solving and interaction with others are important.

Keywords: spatial sorting; selection; learning; non-routine skills; spatial wage disparities; density; agglomeration economies; innovation

JEL-codes: J24; J31; R12

28 pages, May 22, 2014

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201406_Andersson_et_al.pdf PDF-file 

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