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Labour pooling as a source of agglomeration: An empirical investigation

  • Henry G. Overman

    ()

    (London School of Economics and CEPR)

  • Diego Puga

    ()

    (IMDEA Social Sciences, Universidad Carlos III de Madrid, and CEPR)

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.

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Paper provided by Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales in its series Working Papers with number 2008-05.

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Date of creation: 23 Jun 2008
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Publication status: Published in Agglomeration Economics, edited by Edward L. Glaeser, 133-150. Chicago, IL: University of Chicago Press, April 2010
Handle: RePEc:imd:wpaper:wp2008-05
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  1. Becker, G.S. & Murphy, K.M., 1991. "The Division of Labor, Coordination Costs, and Knowledge," University of Chicago - Economics Research Center 92-5, Chicago - Economics Research Center.
  2. Duranton, Gilles & Overman, Henry G, 2002. "Testing for Localization Using Micro-Geographic Data," CEPR Discussion Papers 3379, C.E.P.R. Discussion Papers.
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  4. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June.
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  6. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier.
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  8. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  9. Wheaton, William C. & Lewis, Mark J., 2002. "Urban Wages and Labor Market Agglomeration," Journal of Urban Economics, Elsevier, vol. 51(3), pages 542-562, May.
  10. Dora L. Costa & Matthew E. Kahn, 2000. "Power Couples: Changes In The Locational Choice Of The College Educated, 1940-1990," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1287-1315, November.
  11. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
  12. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  13. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
  14. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  15. Glaeser, Edward L., 2008. "Cities, Agglomeration, and Spatial Equilibrium," OUP Catalogue, Oxford University Press, number 9780199290444.
  16. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June.
  17. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
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