Urban Spatial Structure and the Skill Earnings Gap: Evidence From China

ABSTRACT This paper examines how urban spatial structure affects the earnings gap between high‐ and low‐skilled workers in China. We combine individual‐level panel data with satellite‐derived measures of urban form. We find that less compact cities have a wider skill earnings gap. On the worker side, spatial dispersion increases commuting frictions and reduces access to jobs, with larger earnings losses for low‐skilled workers. On the firm side, it shifts entry toward technology‐intensive activities relative to labor‐intensive ones, potentially strengthening demand for skilled labor. Together, these mechanisms widen the skill earnings gap.