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The Effects of Agglomeration on Wages: Evidence from the Micro-Level

Bernard  Fingleton,  Simonetta  Longhi,  June 2011
Paper No' SERCDP0081: | Full paper (pdf)
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Keywords: urban economics; new economic geography, household panel data

JEL Classification: C21; C31; C33; D1; O18; R20; R12

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
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Abstract:

This paper estimates individual wage equations in order to test two rival non-nested theories of economic agglomeration, namely New Economic Geography (NEG), as represented by the NEG wage equation and urban economic (UE) theory, in which wages relate to employment density. The paper makes an original contribution by evidently being the first empirical paper to examine the issue of agglomeration processes associated with contemporary theory working with micro-level data, highlighting the role of gender and other individual-level characteristics. For male respondents, there is no significant evidence that wage levels are an outcome of the mechanisms suggested by NEG or UE theory, but this is not the case for female respondents. We speculate on the reasons for the gender difference.