Resumen de City of Dreams
Jorge de la Roca, Gianmarco Ottaviano, Diego Puga
Higher ability workers benefit more from bigger cities while housing costs there are higher for everyone. However, there is little sorting on ability. We show this is partly because young individuals have an imperfect assessment of their ability, and, when they learn about it, early decisions have had a lasting impact and reduce their incentives to move. We formalize this idea through an overlapping generations model of urban sorting by workers with heterogeneous ability and self-confidence. Using data from the NLSY79, we find that the city size choices of individuals vary with ability and self-confidence in line with our theoretical predictions.
