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Search, sorting, and urban agglomeration
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DOI：10.1086/322823.png)
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Studies have suggested that urban agglomeration enhances productivity by facilitating the firm-worker matching process. This article develops a model that formalizes this notion and demonstrates that, when firm capital and worker skill are complementary in production, urban agglomeration will tend to generate more efficient, yet segregated matches. As a result, not only will local market size be positively associated with average productivity, it will also generate greater between-skill-group wage inequality and a higher expected return to skill acquisition. Recent data from the counties and metropolitan areas of the United States is consistent with each of these implications.
Keyword:
ECONOMIC-DEVELOPMENT
CITY SIZE
GROWTH
CITIES
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