Wages and the City. The Italian case

Sabrina Di Addario, Eleonora Patacchini and University of Rome La Sapienza

No 243, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy`s Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed to 242 randomly drawn local labor markets (30 percent of the total), we test whether the structure of wages varies with urban scale. We find that every additional 100 employees per square kilometer (100,000 inhabitants) in the local labor market raises earnings by 0.4-0.6 percent (0.1 percent) and that employees working in large cities earn, on average, 2-3 percent higher wages than those in the rest of the economy. The application of spatial data analysis techniques enables us to state that this effect is present only in the large cities surrounded by low-populated areas. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to managers, worker supervisors, and office workers.

Keywords: Wage Differentials; Urbanization; Agglomeration Externalities; Population Clustering; Spatial Autocorrelation (search for similar items in EconPapers)
JEL-codes: J31 R12 (search for similar items in EconPapers)
Date: 2005-08-01
New Economics Papers: this item is included in nep-geo, nep-lab and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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