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Labour Pooling as a Source of Agglomeration: An Empirical Investigation

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  • Henry Overman
  • Diego Puga

Abstract

We provide empirical evidence on the role of labour market pooling in determining thespatial concentration of UK manufacturing establishments. This role arises because largeconcentrations of employment iron out idiosyncratic shocks and improve establishments'ability to adapt their employment to good and bad times. We measure the likely importanceof labour pooling by calculating the fluctuations in employment of individual establishmentsrelative to their sector and averaging by sector. Our results show that sectors whoseestablishments experience more idiosyncratic volatility are more spatially concentrated, evenafter controlling for a range of other industry characteristics that include a novel measure ofthe importance of localized intermediate suppliers.

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Bibliographic Info

Paper provided by Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0006.

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Date of creation: Sep 2008
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Handle: RePEc:cep:sercdp:0006

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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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Keywords: labour market pooling; spatial concentration;

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  1. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," 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 49, pages 2119-2171 Elsevier.
  2. Duranton, Gilles & Henry G Overman, 2003. "Testing for Localisation Using Micro-Geographic Data," Royal Economic Society Annual Conference 2003 69, Royal Economic Society.
  3. Fudenberg, Drew & Ellison, Glenn, 2003. "Knife-Edge or Plateau: When Do Market Models Tip?," Scholarly Articles 3160493, Harvard University Department of Economics.
  4. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004. "Spatial Wage Disparities: Sorting Matters!," CEPR Discussion Papers 4240, C.E.P.R. Discussion Papers.
  5. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc.
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  9. Wheaton, William C. & Lewis, Mark J., 2002. "Urban Wages and Labor Market Agglomeration," Journal of Urban Economics, Elsevier, vol. 51(3), pages 542-562, May.
  10. Gary S. Becker & Kevin M. Murphy, 1994. "The Division of Labor, Coordination Costs, and Knowledge," NBER Chapters, in: Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education (3rd Edition), pages 299-322 National Bureau of Economic Research, Inc.
  11. Thomas J. Holmes, 1995. "Localization of industry and vertical disintegration," Staff Report 190, Federal Reserve Bank of Minneapolis.
  12. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  13. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  14. Glaeser, Edward L., 2008. "Cities, Agglomeration, and Spatial Equilibrium," OUP Catalogue, Oxford University Press, number 9780199290444, September.
  15. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
  16. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June.
  17. Dora L. Costa & Matthew E. Kahn, 2000. "Power Couples: Changes In The Locational Choice Of The College Educated, 1940-1990," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1287-1315, November.
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