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Urban versus Rural Firms: Does Location Affect Labor Demand?

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  • JEAN-PIERRE HUIBAN

Abstract

A dynamic labor demand model is developed and estimated on 1,719 French firms in the food industries, observed over the period 1990-1997. Both descriptive statistics and estimation results (including GMM estimations) show that labor demand and its determinants vary according to firm location. Rural areas are characterized by a low adjustment speed and great sensitivity of labor demand to the labor cost. Peri-urban areas benefit from important economies of scale effects and from technological spillovers. Urban firms are faced with a decline in employment levels, which is mostly due to a faster adjustment of employment to the level of activity. The trade-off between agglomeration and congestion forces may explain the respective situations of both urban and periurban areas. However, the relative inertia that appears in rural areas may be analyzed in a different way, by considering the smaller number of potential opportunities that exist in these areas. Copyright (c) 2009 Wiley Periodicals, Inc..

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Bibliographic Info

Article provided by Gatton College of Business and Economics, University of Kentucky in its journal Growth and Change.

Volume (Year): 40 (2009)
Issue (Month): 4 ()
Pages: 649-672

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Handle: RePEc:bla:growch:v:40:y:2009:i:4:p:649-672

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