The real wage premium of superstar cities

David Card, Jesse Rothstein, and Moises Yi had a cool study published last year to try and get a reliable estimate of the wage benefits you get from living in a superstar city. You might think you can tease this out by just looking at wages in one city and comparing them to wages for the same kind of work in another. But this doesn’t work so well if the workers differ across cities - if more productive workers migrate to superstar cities, then that means the wage comparison is conflating the wage premium associated with the worker and the wage premium associated with the place. So Card and company instead look at how a worker’s wage changes when they move from city to city (even that makes it sound simpler than it really is!). They find coastal cities like New York, the Bay Area, and Washington, DC, pay a wage premium of 10-18% relative to the average city, though those gains are mostly offset by increases in the cost of living (especially housing).