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Title: Learning by working in big cities

Author(s): Jorge de la Roca and Diego Puga

Publication Date: December 2012

Keyword(s): agglomeration economies, city size, earnings premium and learning

Programme Area(s): International Trade and Regional Economics

Abstract: Individual earnings are higher in bigger cities. We consider three reasons: spatial sorting of initially more productive workers, static advantages associated with workers' current location, and learning by working in big cities. Using rich administrative data for Spain, we find that workers in bigger cities do not have higher unobserved initial ability, as reflected in individual fixed-effects. Instead, they obtain an immediate static premium while working in bigger cities and also accumulate more valuable experience, which increases their earnings faster. The additional value of experience accumulated in bigger cities persists even after workers move away and is even stronger for those with higher unobserved initial ability. This combination of effects explains both the higher mean and the greater dispersion of earnings in bigger cities.

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Bibliographic Reference

de la Roca, J and Puga, D. 2012. 'Learning by working in big cities'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9243