Urban Wage Research Articles

Do urban wage premia reflect lower amenities? Evidence from Africa

In most developing countries, wages are substantially higher in cities than in rural areas. One possible explanation is that the higher wage levels of urban areas are offset by lower non-monetary amenities. This paper draws on new high-resolution evidence to document how non-monetary amenities vary between urban and rural areas within 20 Sub-Saharan African countries. We focus on measures of public goods, crime and pollution. We find that in almost all countries, and for almost all measures, the quality of amenities is at least as high in cities as in rural areas. This finding casts doubt on the hypothesis that urban wage premia in the developing world represent a compensation for lower amenities.

Social insurance, demographics, and rural-urban migration in China

We develop a dynamic general equilibrium model to analyze the impact of social insurance policy and demographic changes on rural-urban migration in China. Quantitative analyses indicate that different social insurance programs not only have differential effects on net migration flows but also on the age and income distribution of migrants. Enrolling migrants in urban pensions discourages rural-urban migration at young ages and reverse migration in old-age. In contrast, urban health insurance incentivizes rural-urban migration among low income groups at all ages while simultaneously disincentivizing reverse migration. These differences subsequently have important impacts on overall migration patterns and the macroeconomy. Incorporating population aging in the model also yields an increase in the working age migrant share as higher capital accumulation maintains significant upward pressure on urban wages. Overall, results indicate that general equilibrium effects matter and demographic and policy changes alter migration incentives differently at different stages of the life-cycle.

The Urban Wage Premium in Imperfect Labor Markets

Boris Hirsch, Elke J. Jahn, Alan Manning and Michael Oberfichtner Boris Hirsch is Professor of Economics at Leuphana University of Lüneburg and an affiliate of the IWH and IZA. Elke J. Jahn is Professor of Economics at Bayreuth University, Distinguished Researcher at the Institute for Employment Research (IAB), and an affiliate of the IZA. Alan Manning is Professor of Economics at the London School of Economics and Director of the Community Programme at the Centre for Economic Performance at the LSE. Michael Oberfichtner is Researcher at the Institute for Employment Research (IAB).

Econometric Analysis of Returns to Education of Rural and Urban Labour Markets Workers in Tamil Nadu

The objective of this study was to empirically evaluate the returns to education of rural and urban labour markets workers in Tamil Nadu using the IHDS data with appropriate Econometric models. First, the present study estimated the earning functions of the rural and urban market's workers by OLS technique and standard Mincerian earning functions. Secondly, the quantile regression method was also used to examine the evolution of wage inequality. The findings of the study showed that the effects of education and experience on the log of hourly wages were positive, and these coefficients were statistically significant. The returns to education increased with the level of education and differed among the workers of rural and urban labour markets. The results showed that the rates of returns to primary, middle and higher secondary were higher in the urban market, whereas those of secondary and graduation were higher in the rural market. The study revealed that the effect of education was not the same across the rural and urban wage distribution. The rate of returns differed considerably within education groups across different quantiles of the wage distribution.

Italy and the little divergence in wages and prices: evidence from stable employment in rural areas†

AbstractThis article presents an early modern wage index for stable rural male workers in the Grand Duchy of Tuscany. These wages highlight the importance of distinguishing between locations and contract types when considering historical workers’ living standards, and they speak to a longstanding debate about whether Italy's early modern downturn was purely an urban phenomenon, or an all‐embracing one. Our data lend support to the former view, since we do not detect any downturn in our early modern rural wages. This observation informs the little divergence debate. By comparing rural rather than urban wages and stable rather than casual ones, we find that annual English earnings rose from being only 10 per cent higher than those in Italy in 1650 to being a staggering 150 per cent higher in 1800. If wages reflected labour productivity, then unskilled English workers—unlike their Italian counterparts—grew increasingly productive in the run‐up to the industrial revolution.

Social Insurance, Demographics, and Rural-Urban Migration in China

We develop a dynamic general equilibrium model to analyze the impact of social insurance policy and demographic changes on rural-urban migration in China. Quantitative analyses indicate that different social insurance programs not only have differential effects on net migration flows but also on the age and income distribution of migrants. Enrolling migrants in urban pensions discourages rural-urban migration at young ages and reverse migration in old-age. In contrast, urban health insurance incentivizes rural-urban migration among low income groups at all ages while simultaneously disincentivizing reverse migration. These differences subsequently have important impacts on overall migration patterns and the macro-economy. Incorporating population aging in the model also yields an increase in the working age migrant share as higher capital accumulation maintains significant upward pressure on urban wages. Overall, results indicate that general equilibrium effects matter and demographic and policy changes alter migration incentives differently at different stages of the life-cycle.

Determination of the urban wage premium in Ecuador

This paper aims to determine the urban wage premium in Ecuador. It estimates two wage equations with the nominal and real wage, using instrumental variables to control endogeneity. Four indicators are applied to measure up the urban premium: area, classification by size of a city, cantonal population, and number of firms per capita. The latter is used for the first time and proves to be a better measure to reflect the urban premium. The results show that workers located in metropolis and big cities earn wages 14% and 4% higher than those workers located in small towns, respectively. The wage elasticity is 0.03% with respect to cantonal population, and 0.06% with respect to the number of firms.

The real urban wage in an agricultural economy without landless farmers: Serbia, 1862–1910†

AbstractThis article presents the first estimates of the welfare ratio for Serbia using nineteenth‐ and early twentieth‐century data on the wages of skilled and unskilled workers (including the part paid in kind) and the prices of goods in ‘subsistence’ and ‘respectability’ consumption baskets. It finds stagnation in the unskilled wage, and a modest increase in the skilled wage. The article introduces several adjustments to conventional methodology in order to make it more relevant for predominantly agricultural societies.

Land tenure and land-use in a developing city: A quantitative spatial model applied to Kampala, Uganda

Land rights and tenure systems are an important factor behind poor housing and inefficient land-use in developing country cities. In Kampala, Uganda, four systems of land tenure coexist, allowing a detailed study of the effects of these on household and firm location decisions. Spatially disaggregated data across the city suggest that the presence of a traditional land tenure system (called mailo) skews land-use towards informal housing and away from business and commercial activities. Using a structural model of the city we show that this due to mailo having a positive value for its occupants, attributable to mailo-specific amenity benefits and/ or rent caps. We use the model to investigate the effect of converting all mailo land in the city to leasehold. Despite direct loss of amenity experienced by mailo residents, aggregate city income may rise substantially because of more efficient land-use. Manufacturing firms move into formerly mailo areas and form new clusters of activity. This increases urban wages, particularly among the low skilled, and raises aggregate urban real incomes by 2% in the absence of localisation economies and as much as 6.7% in the presence of such economies of scale.

Post-industrial Economic Restructuring and Wage Inequality in Urban China, 2003–2015: A Sectoral Perspective

Income inequality in urban China has attracted growing attention from China’s urban researchers and policy makers. Whereas many studies have interrogated the pattern and process of the income gap in Chinese cities undergoing the institutional transformation from plan to market, relatively little is known about how such unequal distribution of income is related to China’s ongoing structural transformation toward a post-industrial economy. Drawing on a decomposition methodology based on the Theil index, this study aimed to address this lacuna through an empirical investigation of China’s urban wage inequality from a sectoral perspective. Our empirical study identified the low-wage manufacturing sector and the high-wage producer services sector as the two biggest contributors to urban wage inequality in China. Urban wage inequality within the producer services was found to be caused by the spatial concentration of a disproportionate number of high-paying jobs in a few developed, high-tier city-regions on the eastern coast. Our empirical findings have important implications for the formulation of policies to address the income inequality that plagues China’s continuing urbanization.

Minimum Wage Impacts on the Wage Distribution and Inequality in China

This paper examines the distributional impacts of the minimum wage on the urban wages of Han-minority workers and the implications for urban inequality. County-level minimum wage data is combined with recent proprietary household survey data representative of China’s ethnically diverse areas. The identification strategy relies on an unconditional quantile regression framework that takes into account policy endogeneity using an instrument variable approach. The findings show that minimum wages lead to wage compression along the bottom and middle parts of the urban wage distribution. The minimum wage effects are larger for lower-skilled workers located in ethnic minority counties or that belong to an ethnic minority group. Counterfactual analysis further shows that minimum wages help to significantly reduce aggregate urban wage inequality: increasing minimum wages from a counterfactual benchmark to their observed levels, an average increase of 26%, reduces the Gini coefficient of wages by 10-12%.

Global city development and urban wage inequality in China

ABSTRACT This study stress-tests the hypothesized relationship between global city status and the level of urban inequality in the context of China’s globalizing cities. Based on a multi-level modelling analysis of the wage effect of Chinese cities’ global connectivity, this study identifies a “global connectivity wage premium” for professional occupations, urban individuals with post-graduate degrees, and producer service workers in Chinese cities, as well as a “global connectivity wage discrimination” for clerks and manual workers, urban individuals with no bachelor degree, and consumer service workers. The results confirm the positive association between the degree of global cityness and the level of wage inequality in globalizing China and suggest the presence of mechanisms specific to the Chinese case that undermine the city-wide spillover effects of high-skilled labor forces in globally oriented sectors. It echoes the recent call for “provincializing” global city studies and highlights an additional source of inequality in relation to China’s unrelenting trajectory toward a rising role in the world city network.

Agglomeration Effect of Skill-Based Local Labor Pooling: Evidence of South Korea

Since workplace skills present diverse dimensions of a worker’s ability, it has recently received renewed interest by researchers examining the growth of cities. The purpose of the paper explores the advantage of regional concentrations of workers specialized in different types of skills. Specifically, the analysis estimates the agglomeration effects of skill-based labor pooling on wage levels and wage growth in South Korea. To this end, it constructs skill-based labor pool indices for cognitive, social, technical, and physical skills at a provincial level. The indices show an uneven geographical distribution in varying degrees across four types of skills. The regression results indicate that the urban wage premium of skill-based local labor pooling varies according to types of skills. The greatest magnitude of benefit is incurred by workers in cognitive-skill-oriented occupations and moderate benefits are found in technical- and physical-skill-oriented occupations. An urban wage premium is non-existent in social-skill-oriented occupations. In addition, the wage growth model with job mobility shows that the urban wage premium immediately affects workers who change jobs and relocate to denser areas. As high-wage occupations earn higher wage premiums when workers in these occupations are concentrated, it supports patterns of the polarization of both skills and their effects.

Urbanization Trends and Processes in Kazakhstan

Goals and objectives of the research: the main goal of the research is to analyze urbanization processes occurring in Kazakhstan in the period between 2009 and 2019.
 Methodology: the author uses comparative analysis and synthesis via statistics taken from the Committee on Statistics of the Republic of Kazakhstan by the period of 2009-2019. There is a comparison of the share of urban population, unemployment rate and average monthly salary wage in Almaty, Nur-Sultan, Shymkent.
 Findings : primarily, there is shown an overview of worldwide trends towards urbanization processes. Main causes of these processes globally and regionally are presented either. Afterwards, diagrams and graphs with main indicators as well as description of urbanization in Kazakhstan can be seen. Then it leads to conclusion. The structure of this paper: abstract, main part (with diagrams and tables), conclusion, references.
 Value: The paper reviews the changes of urbanization processes in Kazakhstan. Urbanization today is one of the main trends of the world. Currently the urban population has exceeded the number of people living in rural areas, and this trend will only intensify. Regarding developed countries, it can be seen that 3/4 of the country population tend to live in cities: in the United Kingdom, the rate of urbanization hits 82%, in the USA - 81%, in France - 79%, in Germany - 75%. In accordance with UN forecasts, by 2050, 6.2 billion people will reside in cities, which will be 66% of the total population of the earth. Therefore
 Theoretical or Practical implications: the given research results can be used by governmental committees and implemented for theoretical courses and disciplines towards urbanization.

Urbanization and Its Discontents

American cities have experienced a remarkable renaissance over the past 40 years, but in recent years, cities have experienced considerable discontent. Anger about high housing prices and gentrification has led to protests. The urban wage premium appears to have disappeared for less skilled workers. The cities of the developing world are growing particularly rapidly, but in those places, the downsides of density are acute. In this essay, I review the causes of urban discontent and present a unified explanation for this unhappiness. Urban resurgence represents private sector success, and the public sector typically only catches up to urban change with a considerable lag. Moreover, as urban machines have been replaced by governments that are more accountable to empowered residents, urban governments do more to protect insiders and less to enable growth. The power of insiders can be seen in the regulatory limits on new construction and new businesses, the slow pace of school reform and the unwillingness to embrace congestion pricing. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

The Dead Are Dead/Ancestors Never Die: Migrants, Rural Linkages, and Religious Change in Northeastern Madagascar

Abstract This manuscript explores the dynamic between religion and rural-urban linkages in northeastern Madagascar. I find that church leaders have coalesced around two competing narratives of ancestors. Catholic churches see some types of migrant linkages (e.g., burial in the rural family tomb and participation in rural ancestral rituals) as being in line with Christian beliefs, while Protestant churches see these same activities as morally questionable or potentially satanic. To some degree Protestant migrants exert agency in the face of these religious teachings, and do not view their religion as an impediment to maintaining rural connections. However, quantitative analysis of rural-urban linkage behavior over a twelve-month period shows that Protestants have weaker rural ties compared to Catholics, even for behaviors that are not the focus of religious prohibitions. I offer several explanations for this finding. Protestant migrants are less motivated to invest in all types of rural linkages due to family conflicts after conversion, uncertainty about burial in the rural family tomb, reduced opportunities to develop affective ties with kin, and economic motivations to reduce rural demands on their urban wages.

STRUCTURAL CHANGES AND AGRARIAN CRISES IN KARNATAKA: ANALYSIS OF EMERGING EVIDENCE

Agriculture is the primary occupation of most of Karnataka's rural residents. A total of 123,100 km² of land is cultivated in Karnataka, constituting 25.3% of the total geographical area of the state. Agriculture in Karnataka is heavily dependent on the southwest Monsoon since the extent of arid land in the state is second only to Rajasthan. Only 26.5% of sown area (30,900 km²) is subjected to irrigation. The state has three agricultural seasons – Kharif (April to September), Rabi (October to December) and summer (January to March). This study exploits the rapid technological improvement and development during the Green revolution to estimate the effects of agricultural productivity growth on structural change both in Karnataka and across country. The process of development requires structural change. The structural change of an economy takes place mainly along two dimensions: one is the changing sector-wise shares in GDP and the second is the changing share of the labour force, engaged in each sector. In case of Karnataka State economy, it is seen that as a first step, the agriculture sector loses its importance with a simultaneous growth of the manufacturing sector and tertiary sector. In Karnataka State, the service sector has grown by by-passing the secondary sector. Structural changes in agricultural sector it is also one type of the agrarian crises in Karnataka state. Agriculture is mainly depends upon monsoon so rural people more interested to go urban area due to getting jobs and were wages are high compared to village. Agricultural sector facing problem of agricultural labour due to agricultural labourers are shifted to urban area because of wages in agriculture sector is low compared to urban wages. In this context, this chapter is an attempt to mark out the structural change in terms of input structure, production structure and employment structure. KEY WORDS: primary sector, Secondary sector, Tertiary sector, Agriculture, Agricultural crops cropping pattern, Cropping pattern.

Disappearing Economic Mobility in U.S. Micropolitan Areas

A key driver of urbanization is the pursuit of economic opportunities in cities. One such opportunity is the promise of higher wages in larger cities, a phenomenon known as the urban wage premium. While an urban wage premium has been well-documented among U.S. metropolitan areas, little is known about its existence among micropolitan areas, which represent an important link between rural and dense urban areas. Here we measure the power law scaling coefficient of aggregate annual wages versus workforce for both U.S. metropolitan and micropolitan areas over a 35-year period. We take this coefficient to be the magnitude of the urban wage premium within a type of urban area and find the relationship is superlinear in all years for both area types. While both areas once had similar wage premiums, the premium in micropolitan areas has declined in the era of globalization while the premium across metropolitan areas has generally increased. This growing gap between micropolitan and metropolitan wage premiums is highly correlated with a divergence in voting behavior, with micropolitan voters having become increasingly conservative. Finally, we speculate that if urban dwellers respond to the COVID-19 crisis by migrating, the trends we describe may possibly change significantly.

Urban Wage Premium in a Labor Market with Informality

Urban Wage Premium in a Labor Market with Informality

Spillover effects of the Venezuelan crisis: migration impacts in Colombia

Abstract In the wake of the Venezuelan crisis, Colombian migrants are returning to their place of birth. Since 2016, however, there has been a spike of immigration to Colombia attributable to inflows of the Venezuelan-born. Using high-frequency administrative data, we estimate the impacts of the recent labour supply shock–driven by the economic predicament in Venezuela–on the labour and poverty outcomes of native Colombians. We employ an instrumental variables approach to account for the selection of immigrants into locations with more or less desirable conditions. A 1 percentage point increase in immigration from Venezuela reduces informal sector wages by 10 percentage points in urban areas. As the crisis increased the fraction of migrants by 0.2 percentage points in 2017, we estimate urban wages decreased by a total of 2 percentage points. A dual-pronged approach is warranted to promote the economic assimilation of Venezuelans while protecting the job security of Colombians.