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The causes of the urban wage growth premium

Grant number: 19/26148-0
Support type:Scholarships in Brazil - Doctorate (Direct)
Effective date (Start): September 01, 2020
Effective date (End): March 31, 2022
Field of knowledge:Applied Social Sciences - Economics - Regional and Urban Economics
Principal researcher:Sergio Pinheiro Firpo
Grantee:Thiago de Souza Patto Marcondes da Silva
Home Institution: Instituto de Ensino e Pesquisa (Insper). São Paulo , SP, Brazil
Associated scholarship(s):20/16601-7 - Wage growth and spatial externalities, BE.EP.DD

Abstract

Recent studies show the existence of a dynamic component in the urban wage premium (Glaeser and Mare, 2001; De La Roca and Puga, 2016; Baum-Snow and Pavan, 2012), i.e., workers experience faster wage growth in big cities. We intend to understand the causes of this stylized fact using Brazilian data. We consider three explanations that can rationalize these results, two of them based on agglomeration economies mechanisms. First, big cities could allow better matching between workers and firms within local labor markets. Secondly, big cities could provide a better learning environment for workers, which allows faster human capital accumulation. Finally, there is also the possibility that local wage growth is explained by sorting on skills. We plan to use a two-way fixed-effect estimation that takes into account the possibility of spatial heterogeneity in experience evaluation and acquisition. By estimating a local wage growth premium for different units of analysis, we will be able to relate these values with local labor market and worker characteristics and their respective employment histories. (AU)

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