Productivity Differences and Agglomeration Across Districts of Great Britain
This paper examines the impact of employment density (agglomeration) on the hourly earnings of workers across districts of Great Britain. The potentially two-way causality between agglomeration and productivity is dealt with using two instruments: the total land area of a district and its population density. The estimated agglomeration effect is similar across different levels of territorial aggregation; however, the effect is stronger when looking only across Metropolitan areas. There is evidence of endogeneity only when the sample is split into Metropolitan and Non-Metropolitan areas and even so endogeneity has only little effect on the estimates.
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