Why Has Urban Inequality Increased?

Nathaniel Baum-Snow, Matthew Freedman and Ronni Pavan

American Economic Journal: Applied Economics, 2018, vol. 10, issue 4, 1-42

Abstract: This paper examines mechanisms driving the more rapid increases in wage inequality in larger cities between 1980 and 2007. Production function estimates indicate strong evidence of capital-skill complementarity and increases in the skill bias of agglomeration economies in the context of rapid skill-biased technical change. Immigration shocks are the source of identifying variation across cities in changes to the relative supply of skilled versus unskilled labor. Estimates indicate that changes in the factor biases of agglomeration economies rationalize at least 80 percent of the more rapid increases in wage inequality in larger cities.

JEL-codes: J24 J31 O33 R23 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/app.20160510
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Citations: View citations in EconPapers (67)

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