Wage Inequality and the Location of Cities

Farid Farrokhi, David Jinkins

Research output: Contribution to conferencePaperResearchpeer-review

Abstract

In cross-sectional American census data, we document that isolated cities tend to have less wage inequality. To explain this correlation and other correlations between population and wages, we build an equilibrium empirical model that incorporates high and low-skill labor, costly trade, and both agglomeration and congestion forces. The model bridges the gap between the spatial inequality literature which abstracts from geography, and the economic geography literature which abstracts from inequality. We find that geographical location explains 9.2% of observed variation in wage inequality across American cities. In counterfactual experiments, we find that reductions in domestic trade costs benefit all American workers and decrease welfare inequality. We also examine the effects on inequality and welfare of both regional and national skill-biased technology shocks. We find that in larger cities wage inequality grows more than welfare inequality.
Original languageEnglish
Publication date2017
Number of pages47
Publication statusPublished - 2017
Event2017 Annual Meeting of the Society for Economic Dynamics - Edinburgh, United Kingdom
Duration: 22 Jun 201724 Jun 2017
https://www.economicdynamics.org/sedam_2017/

Conference

Conference2017 Annual Meeting of the Society for Economic Dynamics
CountryUnited Kingdom
CityEdinburgh
Period22/06/201724/06/2017
Internet address

Cite this

Farrokhi, F., & Jinkins, D. (2017). Wage Inequality and the Location of Cities. Paper presented at 2017 Annual Meeting of the Society for Economic Dynamics , Edinburgh, United Kingdom.
Farrokhi, Farid ; Jinkins, David. / Wage Inequality and the Location of Cities. Paper presented at 2017 Annual Meeting of the Society for Economic Dynamics , Edinburgh, United Kingdom.47 p.
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abstract = "In cross-sectional American census data, we document that isolated cities tend to have less wage inequality. To explain this correlation and other correlations between population and wages, we build an equilibrium empirical model that incorporates high and low-skill labor, costly trade, and both agglomeration and congestion forces. The model bridges the gap between the spatial inequality literature which abstracts from geography, and the economic geography literature which abstracts from inequality. We find that geographical location explains 9.2{\%} of observed variation in wage inequality across American cities. In counterfactual experiments, we find that reductions in domestic trade costs benefit all American workers and decrease welfare inequality. We also examine the effects on inequality and welfare of both regional and national skill-biased technology shocks. We find that in larger cities wage inequality grows more than welfare inequality.",
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Farrokhi, F & Jinkins, D 2017, 'Wage Inequality and the Location of Cities' Paper presented at, Edinburgh, United Kingdom, 22/06/2017 - 24/06/2017, .

Wage Inequality and the Location of Cities. / Farrokhi, Farid; Jinkins, David.

2017. Paper presented at 2017 Annual Meeting of the Society for Economic Dynamics , Edinburgh, United Kingdom.

Research output: Contribution to conferencePaperResearchpeer-review

TY - CONF

T1 - Wage Inequality and the Location of Cities

AU - Farrokhi, Farid

AU - Jinkins, David

PY - 2017

Y1 - 2017

N2 - In cross-sectional American census data, we document that isolated cities tend to have less wage inequality. To explain this correlation and other correlations between population and wages, we build an equilibrium empirical model that incorporates high and low-skill labor, costly trade, and both agglomeration and congestion forces. The model bridges the gap between the spatial inequality literature which abstracts from geography, and the economic geography literature which abstracts from inequality. We find that geographical location explains 9.2% of observed variation in wage inequality across American cities. In counterfactual experiments, we find that reductions in domestic trade costs benefit all American workers and decrease welfare inequality. We also examine the effects on inequality and welfare of both regional and national skill-biased technology shocks. We find that in larger cities wage inequality grows more than welfare inequality.

AB - In cross-sectional American census data, we document that isolated cities tend to have less wage inequality. To explain this correlation and other correlations between population and wages, we build an equilibrium empirical model that incorporates high and low-skill labor, costly trade, and both agglomeration and congestion forces. The model bridges the gap between the spatial inequality literature which abstracts from geography, and the economic geography literature which abstracts from inequality. We find that geographical location explains 9.2% of observed variation in wage inequality across American cities. In counterfactual experiments, we find that reductions in domestic trade costs benefit all American workers and decrease welfare inequality. We also examine the effects on inequality and welfare of both regional and national skill-biased technology shocks. We find that in larger cities wage inequality grows more than welfare inequality.

M3 - Paper

ER -

Farrokhi F, Jinkins D. Wage Inequality and the Location of Cities. 2017. Paper presented at 2017 Annual Meeting of the Society for Economic Dynamics , Edinburgh, United Kingdom.