Essays on urban economics and income inequality

Abstract

My dissertation consists of three chapters that examine differences in the organization of production across cities and their role in generating differences in the income distribution. In particular, I examine the role of the span of control, that is, the number of workers per manager, and the role of establishment size.

In Chapter 1, I document a new fact on the spatial differences in the organization of production. The number of workers per manager is decreasing in city size, overall and within industries. This finding is robust to using a variety of definitions for managers. Furthermore, this pattern does not seem to be explained by the location of headquarter services in larger cities.

In Chapter 2, I develop and quantify a model of a system of cities where workers with different skills organize in production teams. The model yields continuous wage distributions in cities of different sizes that resemble the data. I find that technology differs across cities in its productivity but also in its complexity, so there are no incentives for it to diffuse across cities. I then use the model to evaluate two local policies that are designed to address income inequality: a minimum wage and a housing subsidy. I find that a revenue-neutral housing subsidy is more effective than a minimum wage at reducing inequality, as measured by the variance of log wages.

Finally, in Chapter 3, Charly Porcher, Hannah Rubinton, and I study the role of establishment size in explaining the city size wage premium. Using administrative data for Spain we document a positive correlation between city size and establishment size. The establishment size for a typical worker is 30% larger in a city with twice the population density, even after controlling for worker fixed effects and other observables. Controlling for establishment size decreases the static within-worker city-size wage premium from 2.6 to 1.8 percent. It also decreases the medium-term premium of living in a large city from 4.4 percent to 3.5 percent