Heterogeneous returns to knowledge exchange: Evidence from the urban wage premium

Christopher Cunningham (), Michaela C. Patton and Robert R. Reed

Journal of Economic Behavior & Organization, 2016, vol. 126, issue PA, 120-139

Abstract: We posit that some kinds of knowledge are harder to exchange remotely and thus certain types of workers trading in certain types of knowledge benefit more from close physical proximity to others. We first present a theoretical framework in which individuals randomly search for partners to exchange ideas, but that the returns to finding a partner are heterogeneous. In particular, some knowledge is more dependent on interpersonal exchange and most productive when shared with similar individuals. In this manner, we propose that agglomerative environments favor individuals with knowledge that is typically associated with “soft skills” where creativity and informal networking are important. We test this prediction using the most recent sample of the American Community Survey (ACS) in which college graduates are asked about their undergraduate major. Controlling for demographic and regional productivity effects, we find that the urban wage premium varies considerably across majors. In line with the predictions of our model, people with non-STEM majors appear to benefit more from locating within a city. In the spirit of our results for majors, we also find that terminal degrees associated with the mastery of any existing cannon of knowledge such as a J.D. or M.D. experience a smaller urban wage premium.

Keywords: Human capital; Wages; Agglomeration (search for similar items in EconPapers)
JEL-codes: C78 J24 J31 R12 R23 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:126:y:2016:i:pa:p:120-139

DOI: 10.1016/j.jebo.2016.01.001

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