Urbanization - productivity, distribution, and policy

PROJECT MANAGER: KJELL GUNNAR SALVANES

Project duration: 2015-2018

PROJECT DETAILS:

The project is joint with researchers from the Norwegian University of Science and Technology (NTNU) and Statistics Norway (SSB) and funded by the DEMOS program of the Research Council of Norway.

The goals of the project are three-fold. First, the project aims to relate regional growth to productivity by studying the underlying mechanisms of agglomeration effects. Second, the project intends to link the urbanization process and geographical sorting of households and firms to the performance of different groups at the labor market and the overall income distribution. The third goal of the project is to evaluate the role of the public sector and policy in influencing the urbanization process and discuss the consequences of various policies.

Publications:

ALINE BÜTIKOFER AND GIOVANNI PERI, NBER WORKING PAPER NO. 23877, ISSUED IN SEPTEMBER 2017

THE EFFECTS OF COGNITIVE AND NONCOGNITIVE SKILLS ON MIGRATION DECISION

There is growing evidence that cognitive and noncognitive skills affect the economic and social outcomes of individuals. In this paper, we analyze how they affect the migration decisions of individuals during their lifetimes. We use data that combine military enlistment and administrative records for the male population born in 1932 and 1933 in Norway. Records of interviews with a psychologist at age 18 allow us to construct an index of `sociability' and `adaptability' for each individual, as well as an index of cognitive ability, the intelligence quotient. We find that adaptability and cognitive ability have significant and positive impacts on the probability of an individual migrating out of his area, whether this involves rural--urban, long distance, or international migration. Adaptability has a particularly strong impact on migration for individuals with low cognitive skills, implying a strong positive selection of less educated migrants with respect to the (previously unobserved) adaptability skill. We also show that cognitive skills have a strong positive effect on the pre- and post-migration wage differential, whereas adaptability has no significant effect. Moreover, individuals with high cognitive ability migrate to areas with large wage returns to cognitive abilities, whereas this is not true for individuals with high adaptability. This evidence suggests that adaptability reduces the psychological cost of migrating, whereas cognitive skills increase the monetary returns associated with migration.