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The dynamics of local employment in France

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  • Combes, Pierre-Philippe
  • Magnac, Thierry
  • Robin, Jean-Marc

Abstract

This Paper studies the impact of local economic structure on local sectoral employment growth. Local employment growth is decomposed into ‘internal’ growth (the growth of the size of existing plants) and ‘external’ growth (the creation of new plants). Using panel data methods, we estimate the dynamics of both variables simultaneously. Our observations refer to 36 manufacturing, trade and service sectors and 341 French ‘Employment Areas’ in every year between 1984 and 1993. Carefully specifying the short-run dynamics and controlling for fixed effects and endogeneity are proved to be critical devices. The low order of the selected model, an ARMA (1,1), implies that static externalities are prevalent compared to dynamic ones. Moreover, whereas fixed effects explain most of the spatial variation of plant size, plant creation is mainly determined by the current local economic structure. Policies targeted on the creation of new plants should therefore prove to be more rapidly efficient. For instance, large areas endowed with a small number of even size sectors and large leader firms transferring growth to smaller numerous plants experience larger growth.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 56 (2004)
Issue (Month): 2 (September)
Pages: 217-243

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Handle: RePEc:eee:juecon:v:56:y:2004:i:2:p:217-243

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Web page: http://www.elsevier.com/locate/inca/622905

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  2. Pierre-Philippe Combes & Henry Overman, 2003. "The Spatial Distribution of Economic Activities in the European Union," CEP Discussion Papers dp0587, Centre for Economic Performance, LSE.
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  8. Fujita, Masahisa & Mori, Tomoya & Henderson, J. Vernon & Kanemoto, Yoshitsugu, 2004. "Spatial distribution of economic activities in Japan and China," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 65, pages 2911-2977 Elsevier.
  9. Henderson, Vernon & Kuncoro, Ari & Turner, Matt, 1995. "Industrial Development in Cities," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1067-90, October.
  10. J. Vernon Henderson, 1994. "Externalities and Industrial Development," NBER Working Papers 4730, National Bureau of Economic Research, Inc.
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