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Superstar cities have a big advantage in attracting high-paying jobs

In the end, Amazon disappointed everyone. A year ago the e-commerce giant said it would open a second headquarters, and solicited bids from cities keen on the 50,000 new jobs and $5bn in investment it would bring. The gambit might have produced a fascinating experiment in urban development, and a departure from the concentration of top tech firms in a few favoured places. It did not. Though local governments wooed the firm with juicy incentives, no city nabbed the promised co-headquarters. On November 13th Amazon said it would split its new office between New York City and Arlington, a suburb of Washington, dc.

The decision to bring tens of thousands of high-paying jobs to two of America’s richest metropolitan areas is a notable example of a broader trend. Another came a few days earlier, when the Wall Street Journal reported that Google planned a dramatic increase in hiring in New York City. Politicians interested in boosting the fortunes of places other than superstar cities have their work cut out.

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Once, poor places caught up with richer ones. From 1940 to 1980 the gap between wages in rich cities and in poor ones closed at a rate of about 1.4% per year, according to recent work by Elisa Giannone of the University of Chicago. Then convergence halted. Behind cities’ diverging fortunes is a change in the return to education. Wage convergence did not end for all workers after 1980, says Ms Giannone, but only for those with a college degree. That is because well-educated workers have done best in places where there are lots of them. The share of workers with a college education has risen most in cities where the population of graduates was already large. This clustering has helped push incomes in different locations apart. Regional inequality has been worsened by restrictive development rules in thriving places. The resulting competition for pricey living space favours people with higher incomes and filters those of modest means out of superstar cities.

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