Location, Location, Location

David Card, Jesse Rothstein and Moises Yi

American Economic Journal: Applied Economics, 2025, vol. 17, issue 1, 297-336

Abstract: We use linked employer–employee data to study the causal effects of location on earnings in the United States. We estimate a model with employer and employee effects, then aggregate to the commuting zone (CZ) level. Sorting across firms biases traditional "movers" designs. Our model accurately predicts earnings changes for CZ movers after accounting for firm sorting. Worker skills explain half of observed earnings differences across CZs; observable characteristics understate this. Industry composition explains little of average place effects. Costs at least offset CZ earnings premia on average; workers who move to higher-wage CZs have equal or lower real consumption.

JEL-codes: J24 J31 R23 R32 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/app.20220427

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