The Director of the Department of Economics of the Universidad Católica del Norte, Victor Iturra, will visit the Center for Economics and Social Policies on January 9, 2020, to make a presentation entitled “Disentangling the causes of spatial differences in the wage gap: The roles of amenities and knowledge spillovers”. The visit will take place in José Toribio Medina 29 at 13:00 pm.

Abstract

Despite the regular implicit assumption in economics, the wage gap between college- and high school-educated workers varies significantly across space and between labor markets. Nevertheless, the reasons are not well studied, and two bodies of literature usually generate opposite theoretical predictions. On one hand, the literature on knowledge spillovers has suggested an important positive effect associated with the agglomeration of high-educated workers or firms in certain labor markets, which ultimately produces an increase in the wage gap. On the other hand, a strong body of literature has suggested that high amenity places, with relatively higher rents and lower wages, also attract high-educated workers with strong tastes for consumption amenities, therefore reducing the wage gap. In this paper, we identify two factors determining the wage gap across space: amenities and knowledge spillovers from the concentration of high-educated workers. Using data from the Encuesta de Caracterización Soecioeconómica de Chile (CASEN) at the comuna level and a large set of amenities, our results show that cross-city differences in the wage gap between Chilean labor markets are mainly due to the presence of knowledge spillovers with a minor effect of site attributes. Ignoring the importance of these elements in the local composition of wages produce important bias in the estimates.