City of dreams

Jorge De la Roca, Gianmarco Ottaviano and Diego Puga

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone, and yet there is little sorting on ability. A possible explanation is that young individuals have an imperfect assessment of their ability, and, when they learn about it, early decisions have had a lasting impact and reduce their incentives to move. We formalize this idea through an overlapping generations model of urban sorting by workers with heterogenous ability and self-confidence, with the latter defined as individuals’ assessment of their own ability. We then test the location patterns predicted by the model over the life cycle on panel data from the National Longitudinal Survey of Youth 1979. We find that the city-size choices of individuals at different stages vary with ability and self-confidence in a way that closely matches our theoretical predictions.

Keywords: Cities; sorting; agglomeration; self-confidence; learning (search for similar items in EconPapers)
JEL-codes: R10 R23 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-09
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://eprints.lse.ac.uk/60525/ Open access version. (application/pdf)

Related works:
Journal Article: City of Dreams (2023)
Working Paper: City of Dreams (2016)
Working Paper: City of Dreams (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:60525

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