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How are the potential gains from economic activity transmitted to the labour factor: more employment or more wages? Evidence from the Portuguese context

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  • Carlos Carreira
  • Luís Lopes

Abstract

The paper analyses the role of knowledge externalities in firms' employment and workers' wages. We test whether agglomeration economies and regional knowledge base exert a greater impact on wage growth than on employment growth, using spatial panel econometric techniques to control for unobserved spatial effects. Using a spatial panel for six Portuguese manufacturing industries, we found that regional knowledge spillovers, contrary to the theoretical assumptions, have a greater impact on employment in firms than on workers' wages. This analysis might enhance important policy debates about the effects of regional policies on employment and wages.

Suggested Citation

  • Carlos Carreira & Luís Lopes, 2020. "How are the potential gains from economic activity transmitted to the labour factor: more employment or more wages? Evidence from the Portuguese context," Regional Science Policy & Practice, Wiley Blackwell, vol. 12(2), pages 319-348, April.
    • Handle: RePEc:bla:rgscpp:v:12:y:2020:i:2:p:319-348
    DOI: 10.1111/rsp3.12269
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