In search of better opportunities: Sorting and agglomeration effects among young college graduates in Colombia

Abstract We study the sorting of workers that leads to differences in skills across cities of different sizes upon labor market entry. Using administrative data of young college graduates in Colombia, we show such sorting affects the estimation of agglomeration effects. We find a substantial effect of college city size on wages, a much larger one than that of high school or work city size. We analyze how sorting concentrates population and skill in big cities. The most talented individuals sort into big cities, primarily because they move for college and remain for work. Individuals who move for work after college to smaller cities are relatively less able than others in their college cities but become the highest earners in their destination cities. Meanwhile, those who move after college to bigger cities, though relatively talented in their college cities, are not the highest earners in their destination cities.