Urban Wage Premium: 1940-2010

Work in Progress

Abstract

Today, workers in urban areas earn a 16 percent premium over their non-urban counterparts, what is referred to as the Urban Wage Premium . The urban economics literature has explored the drivers of this gap and have found that a large portion of this premium is due to sorting into urban areas, both of individuals and of firms. However, there is far less research on how the importance of sorting has evolved over the 20th Century. In this paper, we explore how the urban wage premium has evolved over the second half of the 20th Century and into the 21st Century, while addressing unobservable sorting following recent econometric advances introduced by Altonji and Mansfield (2018).