"Why are low-skilled not as compensated as expected for higher housing costs ?"

Abstract :
Standard urban economics models tell us that wages, through agglomeration economies effects, are higher in large cities, but that the concentration of economic agents in these large cities increases housing prices. In equilibrium, wages should compensate for differences in housing costs across space, real wages should be equated across cities of different sizes and workers should be perfectly mobile. When considering heterogeneous agents (high-skilled, low-skilled), these models imply that, due to a higher housing cost burden for the low-skilled, the latter should be, compared to the high-skilled,relativelymore compensated in expensive areas. This article firstly aims at measuring robustly, through French data on wages and housing costs, the level of these wage compensations and their evolution over time. It secondly aims at underlining the factors that may explain a lower compensation for the low-skilled.