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The effects of agglomeration on wages: evidence from the micro-level

  • Fingleton, Bernard
  • Longhi, Simonetta

This paper estimates individual wage equations in order to test two rival non-nested theories of economic agglomeration, namely New Economic Geography (NEG), as represented by the NEG wage equation and urban economic (UE) theory , in which wages relate to employment density. The paper makes an original contribution by evidently being the first empirical paper to examine the issue of agglomeration processes associated with contemporary theory working with micro-level data, highlighting the role of gender and other individual-level characteristics. For male respondents, there is no significant evidence that wage levels are an outcome of the mechanisms suggested by NEG or UE theory, but this is not the case for female respondents. We speculate on the reasons for the gender difference.

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File URL: http://repo.sire.ac.uk/handle/10943/276
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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2011-35.

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Date of creation: 2011
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Handle: RePEc:edn:sirdps:276
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  3. Pierre Philippe Combes & GillesDuranton & Henry G.Overman, 2005. "Agglomeration And The Adjustment Of The Spatial Economy," DOCUMENTOS CEDE 001953, UNIVERSIDAD DE LOS ANDES-CEDE.
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  6. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2011. "The identification of agglomeration economies," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 253-266, March.
  7. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November.
  8. Enrique Lopez-Bazo & Bernard Fingleton, 2003. "Explaining the distribution of manufacturing productivity in the EU regions," ERSA conference papers ersa03p197, European Regional Science Association.
  9. Mark E Schaffer, 2005. "XTIVREG2: Stata module to perform extended IV/2SLS, GMM and AC/HAC, LIML and k-class regression for panel data models," Statistical Software Components S456501, Boston College Department of Economics, revised 22 Feb 2015.
  10. Bernard Fingleton, 2006. "The new economic geography versus urban economics: an evaluation using local wage rates in Great Britain," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 501-530, July.
  11. Bernard Fingleton, 2011. "The empirical performance of the NEG with reference to small areas," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 267-279, March.
  12. Antonio Ciccone & Robert E. Hall, 1993. "Productivity and the Density of Economic Activity," NBER Working Papers 4313, National Bureau of Economic Research, Inc.
  13. Harry Garretsen & Ron Martin, 2011. "The Journal of Economic Geography a decade on: where do we go from here?," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 207-213, March.
  14. David Roodman, 2007. "A Note on the Theme of Too Many Instruments," Working Papers 125, Center for Global Development.
  15. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(4), pages 518-29, October.
  16. Steven Brakman & Harry Garretsen & Charles van Marrewijk, 2009. "Economic Geography Within And Between European Nations: The Role Of Market Potential And Density Across Space And Time," Journal of Regional Science, Wiley Blackwell, vol. 49(4), pages 777-800.
  17. Bernard Fingleton (ed.), 2007. "New Directions in Economic Geography," Books, Edward Elgar, number 3818.
  18. Mark E Schaffer & Steven Stillman, 2006. "XTOVERID: Stata module to calculate tests of overidentifying restrictions after xtreg, xtivreg, xtivreg2, xthtaylor," Statistical Software Components S456779, Boston College Department of Economics, revised 22 Feb 2015.
  19. Pierre Philippe Combes & Gilles Duranton & Henry G. Overman, 2005. "Agglomeration and the adjustment of the spatial economy-super-�," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 311-349, 08.
  20. Marco Francesconi & Holly Sutherland & Francesca Zantomio, 2011. "A comparison of earnings measures from longitudinal and cross‐sectional surveys: evidence from the UK," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 174(2), pages 297-326, 04.
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  22. Harry Garretsen & Ron Martin, 2010. "Rethinking (New) Economic Geography Models: Taking Geography and History More Seriously," Spatial Economic Analysis, Taylor & Francis Journals, vol. 5(2), pages 127-160.
  23. Hendry, David F., 1995. "Dynamic Econometrics," OUP Catalogue, Oxford University Press, number 9780198283164, March.
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