City of Dreams

Jorge De la Roca, Gianmarco Ottaviano and Diego Puga

Journal of the European Economic Association, 2023, vol. 21, issue 2, 690-726

Abstract: Bigger cities offer more valuable experiences and opportunities in exchange for higher housing costs. While higher-ability workers benefit more from bigger cities, they are not more likely to move to one. Our model of urban sorting by workers with heterogeneous self-confidence and ability suggests flawed self-assessment is partly to blame. Analysis of the National Longitudinal Survey of Youth 1979 data shows that, consistent with our model, young workers with high self-confidence are more likely to locate in a big city initially. For more experienced workers, ability plays a stronger role in determining location choices, but the lasting impact of earlier choices dampens their incentives to move.

Date: 2023
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Related works:
Working Paper: City of Dreams (2016)
Working Paper: City of Dreams (2014)
Working Paper: City of dreams (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:21:y:2023:i:2:p:690-726.

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