Agglomeration Economies and the Urban Wage Premium in Australia

Jordy Meekes

Australian Journal of Labour Economics (AJLE), 2022, vol. 25, issue 1, 25-54

Abstract: This paper is the first to quantify the economic impact of urban density in Australia on individual wages, referred to as the urban wage premium. By combining Household Income and Labour Dynamics in Australia Survey microdata on 13,112 employed individuals and regional-level population data, population density effects on individual hourly wages are studied over the period 2001 to 2019. A unique feature of this paper is to apply a flow-based clustering algorithm that uses commuting flows to define spatial aggregations. The urban wage premium is estimated conditional on the specific aggregation. The Ordinary Least Squares estimate of the urban wage premium peaks at 2.7 per cent. Controlling for individual fixed effects, the estimate peaks at 1.6 per cent. This evidence suggests that wages increase by 1.6 per cent to 2.7 per cent if local density doubles.

Keywords: Urban wage premium; Agglomeration; Population density; Wages; Australia; HILDA Survey (search for similar items in EconPapers)
JEL-codes: J31 R11 R12 R23 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Agglomeration Economies and the Urban Wage Premium in Australia (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:ozl:journl:v:25:y:2022:i:1:p:25-54

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