The Urban Wage Premium in Imperfect Labour Markets

Boris Hirsch, Elke Jahn and Michael Oberfichtner

No 9635, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 1.1-1.6% 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 1.1-1.4pp 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: monopsony; imperfect labour markets; urban wage premium; search frictions (search for similar items in EconPapers)
JEL-codes: J31 J42 R23 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-01
New Economics Papers: this item is included in nep-geo
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Citations: View citations in EconPapers (9)

Published - substantially revised version coauthored with Alan Manning published in: Journal of Human Resources, 2022, 57, S111-S136

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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 (2019)
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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