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Spatial Polarization

Fabio Cerina (), Elisa Dienesch and Michelle Rendall

No 06-19, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: In this paper, we study the allocation of skills across space and time in the U.S. We start by documenting two facts on the phenomenon of employment polarization: i) it is stronger in larger vs smaller cities and ii) it is mainly driven by heads rather than hours. We then build a spatial general equilibrium model in which workers with heterogeneous skills choose the location in which they live and work. The model provides a theory based measure of skills that we use to investigate how the skill distribution changes across time and space in the U.S. Consistent with the empirical evidence on employment polarization by city size, we find that between 1980 and 2008 larger cities display a higher increase in the fraction of both highand low-skilled workers relative to smaller cities, which in turn display a higher increase in the fraction of medium skilled. We calibrate the model to evaluate the role of technology and find that faster skill-biased technological change in larger cities can account for a substantial fraction of the differential emergence of fat tails and employment polarization between large and small cities.

Pages: 43 pages
Date: 2019-06
New Economics Papers: this item is included in nep-geo and nep-ure
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