American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
IT and Urban Polarization
American Economic Journal: Macroeconomics
(pp. 223–59)
Abstract
We show that differential IT investment across cities has been a key driver of job and wage polarization since the 1990s. Using a novel dataset, we establish two stylized facts: IT investment is highest in firms in large and expensive cities, and the decline in routine cognitive occupations is most prevalent in large and expensive cities. We propose and estimate a model and find that the fall in IT prices helps explain the wage gap between routine and nonroutine cognitive jobs, as well as the shift in employment away from routine cognitive toward nonroutine cognitive jobs.Citation
Eeckhout, Jan, Christoph Hedtrich, and Roberto Pinheiro. 2026. "IT and Urban Polarization." American Economic Journal: Macroeconomics 18 (1): 223–59. DOI: 10.1257/mac.20220306Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics