Understanding the Urban Earnings Growth Premium


It has been documented that larger cities foster faster earnings growth, which is an important driver for cross-sectional spatial earnings inequality. In this paper, I empirically investigate the sources of the urban earnings growth premium. I find that the between-firm and within-firm growth components each explain 66% and 34% of the greater returns to big city experience, respectively. Workers do not move between jobs more frequently but enjoy a steeper job ladder in larger cities. Faster within-firm learning in larger cities is mostly explained by better learning environments at the firm level. The empirical results highlight the important role of firm heterogeneity across cities in explaining the dynamic gains from working in bigger cities.