The Relationship between Location Choice and Earnings Inequality

Peter McHenry ()

No 112, Working Papers from Department of Economics, College of William and Mary

Abstract: This paper provides new empirical evidence about how workers’ locations affect measurements of earnings inequality (and their changes over time) in the United States. Part of the inequality observed in any given U.S. sample is due to the fact that workers with different skills (and therefore earnings) are not distributed symmetrically across locations that are more and less productive (and therefore pay higher and lower wages). In particular, I estimate that a significant and rising proportion of the college wage premium is due to college graduates living in and moving toward higher-paying locations than high school graduates. Furthermore, I assess the impact of location on real wage inequality (adjusting for local costs of living). The higher wages that college graduates enjoy as a result of their location choices are mostly counterbalanced by higher costs of living. From this, I infer that college graduates choose to live in more economically productive labor markets than do workers with less education, but college graduates are not necessarily more capable of exploiting locational wage differences for their own advantage.

Keywords: Earnings inequality; Migration; Regional labor markets (search for similar items in EconPapers)
JEL-codes: J31 J61 R23 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-02-21
New Economics Papers: this item is included in nep-geo, nep-lab, nep-mig and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://economics.wm.edu/wp/cwm_wp112.pdf (application/pdf)

Related works:
Working Paper: The Relationship between Location Choice and Earnings Inequality (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cwm:wpaper:112

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