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This paper deals with the impact of migration on wages. We introduce a spatial dimension into the job search framework, so that the agent faces neither the same job offer distribution nor the same search costs when looking for a job inside his local labor market. This is in comparison to the agent searching outside his local labor market, where migration costs are a factor. We estimate wage equations in which we introduce the decision to migrate as a binary choice, and later as a polychotomic choice (stayer/mover from provinces to Paris/mover from provinces to provinces). We find no selection effect for people with low levels of education, and a positive selection effect for highly educated migrants. When we distinguish the migration destination for highly educated from provinces, we find a hierarchical effect, that is, the selection effect is higher for men who migrate to Paris than for those who migrate to other provinces.

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This paper provides supportive evidence to the notion that the division of labour is limited by the extent of the (local) market. We first propose a theoretical model. Its main prediction is that scarce specialists occupations are over-represented in large cities. Using census data for French cities, we find strong empirical support for this prediction. ABSTRACT: This paper provides some evidence that the division of labour is limited by the extent of the (local) market. We first propose a theoretical model. Its main prediction is that scarce occupations are over-represented in large cities. Using census data for French cities, we then provide strong empirical support for this prediction.

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