Why does birthplace matter so much?

We consider the link between birthplace and wages. Using a unique panel dataset, we estimate a raw elasticity of wages with respect to birthplace size of 4.2%, two thirds of the 6.8% raw elasticity with respect to city size. Part of this effect simply reflects intergenerational transmission and the spatial sorting of parents, part is explained by the role that birthplace size plays in determining current city size. Lifetime immobility explains a lot of the correlation between birthplace and current city size: we show that 43.7% of individuals only ever work while living in the place they were born. Our results highlight the importance of intergenerational and individual sorting in helping explain the persistence of spatial disparities.