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The Dynamics of Local Employment in France

Author

Listed:
  • Combes, Pierre-Philippe

    (GATE, University of Lyon)

  • Magnac, Thierry

    (University of Toulouse I)

  • Robin, Jean-Marc

    (Sciences Po, Paris)

Abstract

We study the impact of local economic structure on employment dynamics. Local employment is decomposed into the product of the average plant size and the number of plants in the area and industry. We estimate the dynamics of both components simultaneously using French yearly data on 36 industries and 341 areas between 1984 and 1993. The careful specification of short-run dynamics and the control for fixed effects and endogeneity are shown to be critical in the empirical model. First, static externalities are prevalent compared to dynamic ones. Moreover, whereas area-and-industry effects explain most of the spatial variation of plant size, the local number of plants is mainly driven by the current local economic structure. Policies targeted towards plant creation should thus be more efficient. For instance, large areas endowed with a small number of even size industries have both more and larger plants. A large number of plants heterogeneous in size increases the average plant size, but the number of plants is higher when plants have similar size.

Suggested Citation

  • Combes, Pierre-Philippe & Magnac, Thierry & Robin, Jean-Marc, 2004. "The Dynamics of Local Employment in France," IZA Discussion Papers 1061, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1061
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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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