Interrelations between the urban wage premium and firm-size wage differentials: a microdata cohort analysis for Germany

摘要

At the interface of regional and labor economics, our paper deals with two central topics in the analysis of wage formation, the urban wage premium and the firm-size earnings differential. Choosing a cohort of workers from a large panel microdata set, we obtain an urban wage premium of 8% and a large firm premium of 11%. We find that large firms play a crucial role in explaining higher productivity levels in urban areas. The urban wage growth effect, however, is not tied to the firm level. Hence our findings confirm the view that externalities are operating in the urban environment and not only within firms.