Income levels are higher in cities. The evidence for the income gap between urban and rural areas is overwhelming, but the agglomeration effect is hard to identify. Recent advances make use of individual level data to separate out sorting and instrumentation to handle the endogeneity of...

The urban economics literature provides ample evidence of an urban wage premium: wages are higher in larger urban areas. This paper addresses three central issues of the urban wage premium about which the field has not yet reached a consensus. First, the extent to which sorting of high ability...

We exploit regional differences in labour market density to conduct a simple empirical test of dynamic monopoly and selection wage theories. According to selection wage theories employers offer above-average wages in order to attract more applicants. This allows them to be choosier and to select...