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Labour pooling as a source of agglomeration: An empirical investigation

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  • Henry G. Overman

    ()
    (London School of Economics and CEPR)

  • Diego Puga

    ()
    (IMDEA Social Sciences, Universidad Carlos III de Madrid, and CEPR)

Abstract

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

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Bibliographic Info

Paper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2008-05.

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Date of creation: 23 Jun 2008
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Publication status: Published in Agglomeration Economics, edited by Edward L. Glaeser, 133-150. Chicago, IL: University of Chicago Press, April 2010
Handle: RePEc:imd:wpaper:wp2008-05

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Keywords: labour market pooling; spatial concentration;

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  1. 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.
  2. 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.
  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. Glenn Ellison & Drew Fudenberg, 2003. "Knife Edge of Plateau: When Do Market Models Tip?," NBER Working Papers 9528, National Bureau of Economic Research, Inc.
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  7. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June.
  8. Glaeser, Edward L., 2008. "Cities, Agglomeration, and Spatial Equilibrium," OUP Catalogue, Oxford University Press, number 9780199290444.
  9. 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.
  10. Gary S. Murphy Becker & Kevin M., 1992. "The Division of Labor, Coordination Costs, and Knowledge," University of Chicago - George G. Stigler Center for Study of Economy and State 79, Chicago - Center for Study of Economy and State.
  11. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2004. "Spatial Wage Disparities: Sorting Matters!," CEPR Discussion Papers 4240, C.E.P.R. Discussion Papers.
  12. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  13. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  14. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
  15. 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.
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