Wage differentials and the spatial concentration of high-technology industries.

Workers in high-tech cities earn raw wages that are on average 17% higher than wages of workers in other cities. Using a large sample from the 5% PUMS of the 2000 Census of Population, this paper presents econometric evidence of a ‘tech-city wage premium’ of approximately 4.6% that is not the result of higher-ability people self-selecting to live in high-tech cities, but rather the result of high-tech cities actually making workers more productive. Although knowledge spillovers are difficult to assess, we use the concepts of the new economic geography and evidence from empirical studies of high-technology regions, such as Silicon Valley and Austin, Texas, to support the view that workers who live in high-tech cities might be more productive because they benefit from a larger supply of knowledge spillovers than workers who live in low-tech cities. [ABSTRACT FROM AUTHOR]