Refugees in Denmark between 1986-1998: Evidence for steeper returns to experience in big cities; an individual’s lifetime wage path depends strongly on placement in the country’s capital, Copenhagen

Fabian Eckert & Conor Walsh & Mads Hejlesen, 2018. "The Return to Big City Experience: Evidence from Danish Refugees," 2018 Meeting Papers 1214, Society for Economic Dynamics. https://ideas.repec.org/p/red/sed018/1214.html

Abstract: Using a random settlement policy for refugees in Denmark between 1986-1998, we provide evidence for steeper returns to experience in big cities. Exploiting exogenous variation in initial placement, we show that the slope of an individual’s lifetime wage path depends strongly on placement in the country’s capital, Copenhagen. Conditional on observables, settled refugees initially earn similar hourly wages across regions, but those placed in Copenhagen see their wages grow 0.63% faster than others with each year of experience they accumulate. We further show that this premium is driven by greater acquisition of experience at high-wage establishments, and differential sorting across occupations. Finally, to account for dynamic selection within the city, we develop and estimate a structural model of earnings dynamics.