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Industry Localization and Earnings Inequality: Evidence from U.S. Manufacturing

While the productivity gains associated with the geographic concentration of industry (i.e. localization) are by now well-documented, little work has considered how those gains are distributed across individual workers. This paper offers evidence on the connection between total employment and the relative wage earnings of high- and low-skill workers (i.e. inequality) within two-digit manufacturing industries across the states and a collection of metropolitan areas in the U.S. between 1970 and 1990. Using measures of overall, between-education-group, and residual inequality, I find that wage dispersion falls significantly as industry employment expands.

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