City of Dreams

Abstract Bigger cities offer more valuable experiences and opportunities in exchange for higher housing costs. While higher-ability workers benefit from bigger cities, they are not likely to move one. Our model of urban sorting by with heterogeneous self-confidence ability suggests flawed self-assessment is partly blame. Analysis the National Longitudinal Survey Youth 1979 data shows that, consistent our model, young high locate a big city initially. For experienced workers, plays stronger role determining location choices, but lasting impact earlier choices dampens their incentives move.