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Why Has Urban Inequality Increased?

  • Nathaniel Baum-Snow
  • Matthew Freedman
  • Ronni Pavan
American Economic Journal: Applied Economics
vol. 10, no. 4, October 2018
(pp. 1-42)
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Abstract

This paper examines mechanisms driving the more rapid increases in wage inequality in larger cities between 1980 and 2007. Production function estimates indicate strong evidence of capital-skill complementarity and increases in the skill bias of agglomeration economies in the context of rapid skill-biased technical change. Immigration shocks are the source of identifying variation across cities in changes to the relative supply of skilled versus unskilled labor. Estimates indicate that changes in the factor biases of agglomeration economies rationalize at least 80 percent of the more rapid increases in wage inequality in larger cities.

Citation

Baum-Snow, Nathaniel, Matthew Freedman, and Ronni Pavan. 2018. "Why Has Urban Inequality Increased?" American Economic Journal: Applied Economics, 10 (4): 1-42. DOI: 10.1257/app.20160510

Additional Materials

JEL Classification

  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J31 Wage Level and Structure; Wage Differentials
  • O33 Technological Change: Choices and Consequences; Diffusion Processes
  • R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
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