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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., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  2. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
  3. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
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  5. Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
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  8. Glenn Ellison & Drew Fudenberg, 2003. "Knife-Edge or Plateau: When do Market Models Tip?," Levine's Working Paper Archive 506439000000000098, David K. Levine.
  9. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-42, April.
  10. Thomas J. Holmes, 1999. "Localization Of Industry And Vertical Disintegration," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 314-325, May.
  11. 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.
  12. 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.
  13. 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.
  14. Duranton, Gilles & Puga, Diego, 2003. "Microfoundations of Urban Agglomeration Economies," CEPR Discussion Papers 4062, C.E.P.R. Discussion Papers.
  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. Glaeser, Edward L., 2008. "Cities, Agglomeration, and Spatial Equilibrium," OUP Catalogue, Oxford University Press, number 9780199290444.
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