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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 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.

Suggested Citation

  • Henry Overman & Diego Puga, 2008. "Labour Pooling as a Source of Agglomeration: An Empirical Investigation," SERC Discussion Papers 0006, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0006
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    More about this item

    Keywords

    labour market pooling; spatial concentration;

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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