Human Capital, Amenities, and Distortions: The Immigrant Earnings Gap across Space

Author: Gabriele Lucchetti (ROCKWOOL Foundation Berlin)
Posted: 25 March 2026

Abstract

I document that the city-size earnings premium is smaller for immigrants than for natives, driven by low-income-country immigrants, who sort less into cognitive occupations in larger cities. I interpret these facts through a spatial equilibrium model with heterogeneous human capital, amenities, and local earnings wedges. Local earnings wedges are the main channel behind the immigrant-native gap in the city-size earnings premium. Removing all immigrant-native differences closes 62 percent of the immigrant-native earnings gap but widens the spatial earnings gap by 20 percent. Expanding college immigration narrows the workers’ earnings gap without widening the spatial earnings gap.
JEL codes: F22, J24, J31, J61, R13
Keywords: Immigrant Earnings Gap, City-Size Earnings Premium, Spatial Equilibrium, Occupational Sorting, Human Capital