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This paper studies how demographics affect labor market power,
the urban wage premium and the spatial concentration of population.
Using disaggregated administrative data from Germany,
I find that the labor supply elasticity to the firm decreases with
age, suggesting that firms have more wage-setting power over older
workers. I develop a quantitative spatial model in which labor market
power depends on the composition of the local workforce. Calibrating
the model with the reduced-form elasticity estimates shows
that differences in labor supply elasticities across age groups explain
8% of the urban wage premium. Age and skill groups together
account for 13%.
