People, places, and firms: improving our understanding of wage and productivity disparities

Abstract In many countries spatial disparities in wages and productivity are large and persistent. This raises questions about the causes and consequences of such disparities. Two inter-related issues—the sorting of high skilled workers and the productivity benefits of urban density—are central to the way in which urban economists have approached these questions. In this commentary, we argue that despite the emerging consensus that sorting matters for wage disparities, the literature has made less progress on other dimensions of these disparities and a number of methodological issues remain unresolved.