The urban wage premium in imperfect labour markets

Boris Hirsch, Elke Jahn, Alan Manning and Michael Oberfichtner

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Using administrative data for West Germany, this paper investigates whether part of the urban wage premium stems from fierce competition in thick labour markets. We first establish that employers possess less wage-setting power in denser markets. Local differences in wage-setting power predict 1.8-2.1% higher wages from a 100 log points increase in population density. We further document that the observed urban wage premium from such an increase drops by 1.5-1.9pp once conditioning on local search frictions. Our results therefore suggest that a substantial part of the urban wage premium roots in differential imperfections across local labour markets.

Keywords: urban wage premium; imperfect labour markets; monopsony; search frictions (search for similar items in EconPapers)
JEL-codes: J31 J42 R23 (search for similar items in EconPapers)
Date: 2019-03-20
New Economics Papers: this item is included in nep-geo, nep-lma and nep-ure
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Citations: View citations in EconPapers (5)

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https://cep.lse.ac.uk/pubs/download/dp1608.pdf (application/pdf)

Related works:
Journal Article: The Urban Wage Premium in Imperfect Labor Markets (2022)
Working Paper: The urban wage premium in imperfect labor markets (2020)
Working Paper: The urban wage premium in imperfect labour markets (2019)
Working Paper: The urban wage premium in imperfect labour markets (2019)
Working Paper: The Urban Wage Premium in Imperfect Labour Markets (2016)
Working Paper: The urban wage premium in imperfect labour markets (2016)
Working Paper: The urban wage premium in imperfect labour markets (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1608

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