In the present study, we investigate whether workers close to cities are paid higher non-agricultural wages than workers in outlying rural areas. We find that workers close to urban areas not only benefit from more opportunities to engage in non-agricultural activities, but also from better paid jobs. In addition, distance exhibits a strongly nonlinear impact. Distance always has a negative impact on wages but the effect is more detrimental, the closer the village is to the urban center. We also find evidence of urban hierarchy effects: workers living close to bigger cities are paid higher wages. Finally, we provide evidence on the transmission channels at work.
