Returns to Communication in Specialised and Diversified US Cities

This CPB Discussion Paper documents and interprets the significance of communication for individual wages within cities with a diversified or specialised industrial structure. Diversified cities house firms which are optimizing their production process by learning from a wide variety of firms. Specialised cities house firms benefiting from the co-agglomeration of similar firms. We find substantial individual wage returns to the performance of communication job tasks in both specialised and diversified US cities in 2009. Communication seems to be less important for the production processes of firms in specialised cities as it is valued less in these cities than in diversified cities. The results are robust to a variety of specifications and other explanations, such as unobserved ability and variation in returns to communication across skill levels. Our results indicate that there is no one-type-fits-all advantage of city environments.