NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Sebastian Findeisen

University of Mannheim
Department of Economics
Germany

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of Mannheim

NBER Working Papers and Publications

November 2018Matching in Cities
with Wolfgang Dauth, Enrico Moretti, Jens Suedekum: w25227
In most countries, average wages tend to be higher in larger cities. In this paper, we focus on the role played by the matching of workers to firms in explaining geographical wage differences. Using rich administrative German data for 1985-2014, we show that wages in large cities are higher not only because large cities attract more high-quality workers, but also because high-quality workers are significantly more likely to be matched to high-quality plants. In particular, we find that assortative matching—measured by the correlation of worker fixed effects and plant fixed effects—is significantly stronger in large cities. The elasticity of assortative matching with respect to population has increased by around 75% in the last 30 years. We estimate that in a hypothetical scenario in wh...
 
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