Urban residence as a driver of wealth differentials: New evidence from Norway

Abstract

AbstractWe investigate theoretically and empirically how urban residence contributes to interpersonal differentials in wealth accumulation trajectories through its interrelated influences on labour and housing market outcomes. On the basis of Norwegian register data, we estimate models of one's position in various national wealth distributions over the 2010–2018 period, employing fixed‐effects to reduce geographic selection bias and obtain plausibly causal estimates of the impact of moving between levels of the rural–urban hierarchy. We find that residing in a more urbanized area for a longer duration is strongly related to one's rank in the net wealth, housing wealth and financial wealth distributions. Differentials in net wealth growth among levels of urbanization are most dramatic for younger and higher‐educated individuals, with further advantages for those who settle in Oslo. Structural equation modelling reveals that these plausibly causal effects arise primarily through gains in housing equity and (to a lesser degree) in earnings and capital incomes, confirming our conceptual model.