Abstract

A strong positive monotonic relationship between wage inequality and city size developed between 1979 and 2007 in the United States. After accounting for differences in skill composition across cities of different sizes, we find that at least 23% of the nationwide increase in the variance of log hourly wages is explained by the more rapid growth in wage inequality in larger locations than in smaller locations. This influence occurred throughout the wage distribution, was most prevalent during the 1990s, and was mostly driven by more rapid growth in within-skill-group inequality in larger cities.

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