The urban wage premium in imperfect labour markets

Arbeitspapier

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 1.8-2.1% 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 1.5-1.9pp 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IAB-Discussion Paper ; No. 21/2019

Classification and Topics

• Classification: Wirtschaft ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics ; Monopsony; Segmented Labor Markets ; Wage Level and Structure; Wage Differentials
• Subject: Imperfect labour markets ; monopsony ; search frictions ; urban wage premium

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hirsch, Boris ; Jahn, Elke J. ; Manning, Alan ; Oberfichtner, Michael
• Event: Veröffentlichung
• (who): Institut für Arbeitsmarkt- und Berufsforschung (IAB)
• (where): Nürnberg
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/204868
• Last update: 10.03.2025, 11:44 AM CET