The decision to hire a school principal is normally made by the local school
district. The level of urbanization will determine, in theory, the fit between the district’s
skills requirements and the skills of principals actually employed. This paper examines
the spatial variation in two skills: grade-school teaching experience and previous
experience as principal for a sample employed during the 1990’s.
The hypothesized relationship between urbanization and labor matching assumes
the market for principals is primarily local, at least at the level of the metropolitan area,
and survey evidence suggests it largely is. The 1993-94 Schools and Staffing Survey,
which sampled approximately nine thousand school principals, found that over sixty
percent of those who changed schools remained within the same school district. And
among those who moved across districts, over three-quarters remained within-state.
Although the survey data excludes first time principals, the sample evidence supports the
premise of a local labor market.1
Empirical studies of labor matching have lagged in development behind the
theory. A microeconomic empirical literature has recently developed testing the quality
of labor matches by defining an efficient match as one in which the productivity of the
employer corresponds with that of the hired worker (Abowd et al. 2004; Abowd,
Kramarz and Margolis, 1999; and Andersson, Burgess and Lane, 2004). Given that a
labor match takes place at a particular geographic location, a separate literature has
developed examining the interaction between labor matching and space. The effect labor
sorting has on spatial wage inequality has been studied by Combes, Duranton and
1 Even if the market for principals typically extended beyond the metropolitan area, larger urbanized areas
may still generate smaller skills variation. Consumption amenities in larger areas may draw a larger pool
of applicants for every job opening, resulting in tighter final labor matches. See Glaeser, Kolko and Saez
(2001) for a discussion of the role urban amenities may play in attracting high skilled labor.