Workers who severely underestimate their ability may nevertheless relocate from a small to a big city once labour market experience provides them with better information about their true capabilities. That initial misjudged decision then becomes self-validating: having incurred a steep cost to gain more valuable experience, they find they might at least take advantage of this by remaining in the big city.Ĭonversely, some underconfident young workers spend their lives in a small city, even though a correct initial ability assessment would have made them self-select into a big city. Thus, some overconfident young workers start their career in a big city, while they would have chosen a small city with better self-assessment. By the time they learn enough about their actual ability, those early decisions have had a lasting impact, reducing their incentives to move and affecting their lifetime earnings.Īnalysis of nlsy79 data shows that, in line with our model predictions, the location choices of young workers are guided by self-confidence rather than ability. Workers who misjudge their ability at an early career stage make location decisions they would not have made had they known their ability. The article proposes a model of urban sorting by workers with heterogeneous self-confidence and ability, which suggests that flawed self-assessment is partly to blame. While higher-ability workers benefit more from bigger cities, they are not more likely to move to one. The computer programs on this page will serve nlsy79 data users to generate an individual-level panel for general purposes.īigger cities offer more valuable experience and opportunities in exchange for higher housing costs. This survey by the us Bureau of Labor Statistics ( bls) follows a nationally representative sample of men and women who were 14-22 years old in 1979. The primary data source is the National Longitudinal Survey of the Youth 1979 ( nlsy79).

Ottaviano, and Diego Puga in their article 'City of dreams,' to be published in the Journal of the European Economic Association. This page distributes and documents computer programs and data to replicate the results obtained by Jorge De la Roca, Gianmarco I.

Code for National Longitudinal Survey of Youth 1979 Geocode Data Data and replication files for 'City of dreams' by Jorge De la Roca, Gianmarco I.

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