Will there be a concentration of alikes? The impact of labor market structure on industry mix in the presence of product market shocks
AbstractWe analyze determinants of regional industry mix and focus especially on the influence of labor market characteristics. By combining a labor market pooling argument with an argument involving the cost of switching a worker from one firm to another, we show that in the presence of product market shocks there exists an interesting trade-off for the concentration of firms of the same industry in one region. Firms belonging to different industries are hedged against industry-specific shocks if they settle in the same region, but face higher switching costs (retraining costs for workers moving from one firm to another). In addition, with a given supply of labor there is an additional rationing effect affecting the location decisions of firms. Against the background of these trade-offs we analyze the resulting location decisions of firms in a two-regions-two-industry-four-firm framework. We analyze the impact of different parameters on the location choice of firms. --
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Bibliographic InfoPaper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 140.
Date of creation: 2001
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Web page: http://www.econstor.eu/handle/10419/20
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local labor market; product market shocks; industry structure; imperfect competition;
Find related papers by JEL classification:
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- J4 - Labor and Demographic Economics - - Particular Labor Markets
- R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
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- Combes, Pierre-Philippe & Duranton, Gilles, 2001.
"Labour Pooling, Labour Poaching and Spatial Clustering,"
CEPR Discussion Papers
2975, C.E.P.R. Discussion Papers.
- Combes, Pierre-Philippe & Duranton, Gilles, 2006. "Labour pooling, labour poaching, and spatial clustering," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 1-28, January.
- Pierre-Philippe Combes & Gilles Duranton, 2001. "Labor Pooling, Labor Poaching and Spatial Clustering," CEP Discussion Papers dp0510, Centre for Economic Performance, LSE.
- Gerlach, Heiko A. & Rønde, Thomas & Stahl, Konrad O., 2008. "Labor Pooling in R&D Intensive Industries," ZEW Discussion Papers 08-074, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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