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The dynamics of local employment in France

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

    ()

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 heterogenous in size also increases the average plant size, but the number of plants is higher when plants have similar size.

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Paper provided by Laboratoire d'Economie Appliquee, INRA in its series Research Unit Working Papers with number 0402.

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Length: 30 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:lea:leawpi:0402
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Web page: http://www.inra.fr/Internet/Departements/ESR/UR/lea/index.html

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  1. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  2. Combes, Pierre-Philippe & Overman, Henry G., 2004. "The spatial distribution of economic activities in the European Union," 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 64, pages 2845-2909 Elsevier.
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  10. Davis, Steven J & Haltiwanger, John & Schuh, Scott, 1996. " Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts," Small Business Economics, Springer, vol. 8(4), pages 297-315, August.
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  13. Vernon Henderson & Duncan Black, 1999. "Spatial Evolution of Population and Industry in the United States," American Economic Review, American Economic Association, vol. 89(2), pages 321-327, May.
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