Institute Working Paper 24

The Return to Big City Experience: Evidence from Danish Refugees

Fabian Eckert | Opportunity & Inclusive Growth Visiting Scholar and Princeton University
Mads Hejlesen | Aarhus University
Conor Walsh | Yale University

Published September 13, 2019

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.

DOI: https://doi.org/10.21034/iwp.24

Read the PDF ›