Labor and the City, Or How Do Individuals Benefit from Working in Urban Areas?

Abstract

A large body of work is dedicated to the study of wage differentials in different labor market extents. Identical workers in large labor markets have higher wages than those of smaller ones and non-urbanized areas — what is called "urban wage premium". This paper examines the existing literature about this phenomenon. Author presents the main findings in the research field, describing how earlier studies of regional wage disparities and further development of agglomeration economies theory contribute to measuring and eplaining the urban wage premium. Sources of urban premia are traditionally found in the micro-foundations of agglomeration economies. Lastly, author provides with current discussion, which examines labor market discrimination in the context of urban premium and the latest studies of urban wage premium in developing countries.