Wage inequality between financial hubs and periphery

The observation that large cities pay higher wages for the same skilled work has caught the attention of scholars recently. The urban wage premium thesis suggests that urban sorting, skill matching and learning externalities in large cities result in a spatial wage gap between large and small cities. In this paper, a different spatial lens of wage premium is examined. Specifically, we hypothesize that the wage premium phenomenon may be more prominent between networked and less networked cities than between large and small cities. We test this hypothesis on skilled financial workers and their human capital networks. The results indicate that the financial human capital network is structured spatially around hubs and peripheral cities. Wage inequality is significant between centrally located hubs and peripherally located cities compared to large and small cities. The findings provide evidence for a networked city wage premium, suggesting that information and resource connections structured by skilled individuals contribute to wage differences between cities. (C) 2015 Elsevier Ltd. All rights reserved.