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I.


Introduction


Cities expand the choices open to participants in the labor market. The resulting
efficiency of urbanization arises from, among other factors, tighter labor market matches
(Kim, 1990; Sato, 2001; Wheeler, 2001). If cities produce more efficient labor matches,
urbanization should decrease the variation in skills across employees in a specific
occupation. If a job calls for a specific set of labor skills, urban areas should be more
able to provide laborers with those skills. This study tests the matching efficiency of
cities by examining the relationship between urbanization and the heterogeneity in skills
among public school principals. Matching efficiency grows in theory with urban size and
density - the primary measures of urbanization - if job search exhibits increasing returns
(Sato, 2001). A reduction in skills heterogeneity among school principals in more
urbanized areas would reflect an increase in matching efficiency in the local labor
markets.

The public school principal is examined for a number of reasons. It is an
occupation whose required skills primarily involve experience in one field - grade-school
education. School principal is a reasonably well-defined occupation compared to, for
example, school teacher, which can vary by subject taught and grade level. The demand
for public school principals over space is largely exogenous to the geographic distribution
of required labor skills. This is important because an area may produce close
employment matches for a particular occupation not because of its level of urbanization
but due to its specialization in a particular sector and concentration of specific labor
skills. Grade-school education is a service whose per capita demand does not
dramatically vary over geography, and which is largely not exported.



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