Spatial Sorting

Recognition Program

Authors: Jan Eeckhout, Roberto Pinheiro and Kurt Schmidheiny

Journal of Political Economy, Vol. 122, No 3, 554--620, January, 2014

We investigate the role of skill complementarities in production and mobility across cities. The nature of the complementarities determines the equilibrium skill distribution across cities. With extreme-skill complementarity, the skill distribution has thicker tails in large cities, with top-skill complementarity, there is first-order stochastic dominance. Using wage and housing price data, we find robust evidence of thick tails in large cities: large cities disproportionately attract both high- and low-skilled workers, while average skills are constant across city size. This pattern of spatial sorting is consistent with extreme-skill complementarity, where the productivity of high-skilled workers and of the providers of low-skilled services are mutually enhanced.

This paper is acknowledged by the Barcelona GSE Research Recognition Program