Wage growth and spatial externalities

• Grant number: 20/16601-7
• Support Opportunities: Scholarships abroad - Research Internship - Doctorate (Direct)
• Start date: November 30, 2021
• End date: September 29, 2022
• Field of knowledge: Applied Social Sciences - Economics - Regional and Urban Economics
• Principal Investigator: Sergio Pinheiro Firpo
• Grantee: Thiago de Souza Patto Marcondes da Silva
• Supervisor: David Edward Card
• Host Institution: Instituto de Ensino e Pesquisa (Insper). São Paulo , SP, Brazil
• Institution abroad: University of California, Berkeley (UC Berkeley), United States
• Associated to the scholarship: 19/26148-0 - The causes of the urban wage growth premium, BP.DD

Abstract

This project is concerned with the relationship between wages and cities. A recent literature has documented the existence of a dynamic component in the urban wage premium, i.e., workers in big cities experience faster wage growth. However, we do not understand exactly how this process operates within a city. Workers may benefit more than others over time by being employed in a neighborhood where the density of employment is higher. These effects could be enhanced by other factors such as the proximity to workers in the same occupation and the proximity to more skilled workers. We propose an empirical investigation that aims to understand how the spatial distribution of employment in an urban area affects wage dynamics. For this purpose, we plan to use geocoded matched employer-employee data for the urban area of São Paulo. The identification of causal effects comes from the opening of new establishments. We intend to combine these events with the previous spatial distribution of employment in the proximity and estimate the wage growth effects on workers of different occupations and skill levels. Our methodology allows us to estimate the range of these spatial externalities and how important they are to determine the individual wage profile. Moreover, since the data associate workers with employers we are able to analyze wage growth effects within and between jobs. (AU)