Simone Zanella Cavallero (Universitat Pompeu Fabra)
WorkersÂ’ wealth shapes career dynamics by influencing job search and migration decisions. While economic opportunities concentrate in large cities, high living costs often prevent many workers from taking advantage of them. I develop a framework where wealth interacts with spatial search frictions to explain why some individuals remain stuck in low-paying jobs at the bottom of the ladder while others climb to the top. High living costs in productive cities amplify the trade-off between wages and unemployment risk, strengthening precautionary motives that lead low-wealth workers to accept lower-paying jobs. Using French administrative data, I document two facts that highlight the role of wealth. First, the spatial job ladder is steeper for low-wealth workers. Second, financial constraints limit upward mobility by reducing access to high-wage jobs in productive cities. Altogether, the calibrated model accounts for about one-third of the residual wage inequality observed in the data, of which roughly two-thirds is due to local job ladder heterogeneity. Relaxing borrowing constraints increases the share of low-wealth workers in the most productive cities by around 30%. Finally, place-based policies that improve insurance against unemployment risk in high-productivity cities raise welfare by enabling financially constrained workers to access steeper job ladders.