Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/130322
Authors: 
Hirsch, Boris
Jahn, Elke J.
Oberfichtner, Michael
Year of Publication: 
2016
Series/Report no.: 
IZA Discussion Papers 9635
Abstract: 
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 1.1-1.6% 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 1.1-1.4pp 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.
Subjects: 
urban wage premium
imperfect labour markets
monopsony
search frictions
JEL: 
R23
J42
J31
Document Type: 
Working Paper

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