Did cities increase skills during industrialization? Evidence from rural-urban migration

The process of industrialization is typically associated with urbanization and a large urban-rural gap in productivity and skills. To what extent were these disparities driven by the direct impact on occupational attainment of living in an urban area or the result of the positive self-selection of migrants moving to cities? In this paper, we leverage exceptional Swedish longitudinal data that allow us to estimate the impact of rural-urban migration on occupational attainment during Sweden’s industrialization from the 1880s to the 1930s using a staggered treatment difference-in-differences estimator. We attribute roughly half of the urban premium to a direct impact of living in an urban area, whereas the other half is driven by self-selection into cities. A third of the direct impact of residing in cities is explained by a static effect, reflecting the urban advantage, while the rest is the result of a dynamic effect as individuals move into higher-skilled occupations over time in urban areas.