| Abstract: |
We provide a spatial equilibrium model with skill heterogeneity and then bring
the model to data on workers living in Italian cities. Theoretically, we
postulate that agglomeration to affect both production and consumption.
Moreover, we allow the evaluation of urban amenities to vary across
skill-groups. Empirically, we find evidence of a substantial urban rent
premium, while we fail to find support for the urban wage premium. These
results apply more dramatically to higheducated individuals, who care about
the consumption effects of agglomeration disproportionately more than their
lesseducated counterparts. We show that urban skilled workers benefit from
jobs of higher quality (better working environment; higher consideration
received by others) and valuate amenities more (local public goods, such as
transportation, health and schooling services; shopping possibilities, and the
cultural consumption potentials made possible by the location of cinemas,
theaters, and museums). |