Accumulating valuable work experience: The importance of large firms and big cities

Using linked employer-employee data on labor market biographies of workers in Germany, this paper analyzes where valuable work experience is primarily acquired. It distinguishes between learning effects related to firm size and labor market size. We show that wages increase with the size of the cities and establishments in which experience was accumulated. Almost 40 percent of the dynamic benefits of working in large cities are in fact due to working in large firms. We provide evidence on two potential explanations for the role of size: formal training increases with firm size and the frequency of job changes with city size.