Wage distribution and the spatial sorting of workers and firms

Alessia Matano and Paolo Naticchioni

No 8-DEISFOL, Working Papers - Dipartimento di Economia from Dipartimento di Economia, Sapienza University of Rome

Abstract: Spatial sorting plays an important role in accounting for disparities in average wages among locations. This paper shows that sorting also matters when addressing the relation between spatial externalities and wage distribution, i.e. across workers located at di erent percentiles of the wage distribution. Using Italian employer-employee panel data we can control for individual and firm heterogeneity as well as for unobserved individual heterogeneity by means of quantile fixed e ects estimates. After controlling for the sorting of workers the spatial externality impacts dampen along the whole wage distribution and generally remain positive only in the upper tail. As for firm sorting, it becomes uniform along the wage distribution once individual fixed effects are considered. We also point out that the impact of worker sorting is not homogeneous across sectors: along the density dimension it occurs mainly in skill-intensive sectors, while along the specialization dimension it is concentrated in the unskill-intensive sectors.

Keywords: Spatial Externalities; Spatial Sorting; Wage Distribution; Quantile Fixed Effects (search for similar items in EconPapers)
JEL-codes: J31 J61 R23 R30 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2009, Revised 2009
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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