Working Paper

The Return to Big City Experience: Evidence from Danish Refugees

Abstract: We offer causal evidence of higher returns to experience in big cities. Exploiting a natural experiment that settled political refugees across labor markets in Denmark between 1986 and 1998, we find that while refugees initially earn similar wages across locations, those placed in Copenhagen exhibit 35% faster wage growth with each additional year of experience. This gap is driven primarily by differential sorting towards high-wage establishments, occupations, and industries. An estimated spatial model of earnings dynamics attributes an important role to unobserved worker ability: more able refugees transition to more productive establishments faster in Copenhagen than in other cities.

Keywords: Agglomeration economies; Urban; Regional labor markets; Resettlement; Wage differentials;

JEL Classification: J31; J61; R11; R12; R23;

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Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2019-08-13

Number: 24

Pages: 63 pages