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The Dynamics of Local Employment in France

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  • Combes, Pierre-Philippe
  • Magnac, Thierry
  • Robin, Jean-Marc

Abstract

This Paper studies the impact of local economic structure on local sectoral employment growth. Local employment growth is decomposed into ‘internal’ growth (the growth of the size of existing plants) and ‘external’ growth (the creation of new plants). Using panel data methods, we estimate the dynamics of both variables simultaneously. Our observations refer to 36 manufacturing, trade and service sectors and 341 French ‘Employment Areas’ in every year between 1984 and 1993. Carefully specifying the short-run dynamics and controlling for fixed effects and endogeneity are proved to be critical devices. The low order of the selected model, an ARMA (1,1), implies that static externalities are prevalent compared to dynamic ones. Moreover, whereas fixed effects explain most of the spatial variation of plant size, plant creation is mainly determined by the current local economic structure. Policies targeted on the creation of new plants should therefore prove to be more rapidly efficient. For instance, large areas endowed with a small number of even size sectors and large leader firms transferring growth to smaller numerous plants experience larger growth.

Suggested Citation

  • Combes, Pierre-Philippe & Magnac, Thierry & Robin, Jean-Marc, 2003. "The Dynamics of Local Employment in France," CEPR Discussion Papers 3912, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3912
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    More about this item

    Keywords

    economic geography; employment; local labour markets; panel data;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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