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The Return to Big City Experience: Evidence from Refugees in Denmark

Institute Working Paper 24 | Revised March 17, 2020

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Authors

Mads Hejlesen Aarhus University

Conor Walsh Yale University

The Return to Big City Experience: Evidence from Refugees in Denmark

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.

This paper previously circulated with the title "The Return to Big City Experience: Evidence from Danish Refugees."