Abstract: This paper studies the effect of spatial sorting on inequality through two channels: spatial differences in technology and the endogenous organization of production. First, I document a new fact on the spatial differences in the organization of production. The number of workers per manager is decreasing in city size, overall and within industries. I develop and quantify a model of a system of cities where workers of different skills organize in production teams. The model yields continuous wage distributions in cities of different size that resemble the data. I find that technology differs across cities in its productivity but also in its complexity, so there are no incentives for it to diffuse across cities. I then use the model to evaluate two local policies that are designed to address income inequality: a minimum wage and a housing subsidy. I find that a revenue-neutral housing subsidy is more effective than a minimum wage at reducing inequality, measured by the variance of log wages.
Clara studies inequality in US cities. The goal of her research is to explain why bigger cities, starting in the 80s and 90s became more unequal than smaller cities. In order to do so, she's building a theoretical model that will help us look at data on US cities and see which explanations are more convincing. Most of the work she does is writing mathematical proofs about the model, coding to solve the model in Matlab, and analyzing survey data in Stata.