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Title: The Relationship between Location Choice and Earnings Inequality

Citation Type: Working Paper

Publication Year: 2011

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Abstract: This paper provides new empirical evidence about how workers locations affect measurements of earnings inequality (and their changes over time) in the United States. Part of the inequality observed in any given U.S. sample is due to the fact that workers with different skills (and therefore earnings) are not distributed symmetricallyacross locations that are more and less productive (and therefore pay higher and lower wages). In particular, I estimate that a significant and rising proportion of the college wage premium is due to college graduates living in and moving toward higher-paying locations than high school graduates. Furthermore, I assess the impact of location on real wage inequality (adjusting for local costs of living). The higher wages that college graduates enjoy as a result of their location choices are mostly counterbalanced by higher costs of living. From this, I infer that college graduateschoose to live in more economically productive labor markets than do workers with less education, but college graduates are not necessarily more capable of exploiting locational wage differences for their own advantage.

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Authors: McHenry, Peter

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Institution: College of William and Mary

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Publisher Location: Williamsburg, VA

Data Collections: IPUMS USA

Topics: Education, Labor Force and Occupational Structure

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