Small towns near cities offer bigger pay hikes

A study by Gaurav Khanna of the University of California, San Diego analyzed job histories of over 500 million LinkedIn users to isolate location's effect on pay.

Place accounts for 45% to 73% of wage gaps between cities within a country, and 93% across borders after adjusting for purchasing power.

Vaduz, Liechtenstein has the highest location premium, while among big countries, U.S. cities like San Francisco and New York rank highest.

In rich countries, high-wage cities also offer large location premiums, but in poorer countries like India, smaller towns near big cities provide the biggest pay bumps.

In India, constraints like scarce housing and congested transport limit productivity, causing employment to shift to less efficient firms that pay lower wages.