WAGES AND THE CITY.THE ITALIAN CASE

We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy'sSurvey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employeesdistributed in 242 randomly drawn local labor markets (30 percent of the total), we test whether the structure of wagesvaries with urban scale. We find that every additional 100 employees per square kilometer (100,000 inhabitants) in the locallabor market raises earnings by 0.4-0.6 percent (0.1 percent) and that employees working in large cities earn, on average, 2-3 percent higher wages than those in the rest of the economy. The application of spatial data analysis techniques enables usto state that this effect is present only in the large cities surrounded by low-populated areas. We also find that urbanizationdoes not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providinga premium to managers, worker supervisors, and office workers...