Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/256918 
Year of Publication: 
2022
Series/Report no.: 
KRTK-KTI Working Papers No. KRTK-KTI WP - 2022/5
Publisher: 
Hungarian Academy of Sciences, Institute of Economics, Centre for Economic and Regional Studies, Budapest
Abstract: 
While most empirical studies document that cognitive and social skills are strong predictors of individual earnings, their impact is not homogenous in space. We argue that dense urban settings utilize cognitive and social skills more intensively than rural areas, therefore the labour market return to these skills is higher in cities. Using data from a representative survey recording the skills requirements of Hungarian firms, we show that social skills are rewarded more in dense urban areas. Surprisingly, this pattern is not observed for cognitive skills. We use instrumental variables strategy to correct for measurement errors in skills, and to deal with the endogeneity of agglomeration. Our results are robust to alternative agglomeration measures and a large set of controls, however, returns to skills vary considerably across worker groups and industries.
Subjects: 
agglomeration
cognitive and social skills
wages
urban labour markets
JEL: 
J24
J31
R12
Document Type: 
Working Paper

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