IDEAS home Printed from https://ideas.repec.org/p/pri/indrel/662.html
   My bibliography  Save this paper

Location Effects or Sorting? Evidence from Firm Relocation

Author

Listed:
  • Pauline Carry

    (Princeton University)

  • Benny Kleinman

    (Stanford University)

  • Elio Nimier-David

    (Cornell University)

Abstract

Why are wages in cities like New York or Paris higher than in others? This paper uses firm mobility to separate the role of “location effects†(e.g., local geography, infrastructure, and agglomeration) from the spatial sorting of workers and firms. Using French administrative records and U.S. commercial data, we first document that firm mobility is widespread: 4% of establishments relocate annually. Establishments retain their main activity and structure as they move, but adjust their workforce and wages. Combining firm and worker mobility, we then decompose wage disparities across French commuting zones. We find that spatial wage differences are largely driven by the sorting and co-location of workers and firms: location effects account for only 2–5% of disparities, while differences in the composition of workers and establishments account for around 30% and 15%, respectively. The remaining half is accounted for by the co-location of high-wage workers and firms, especially in cities with high location effects. Revisiting the elasticity of local wages to population density, we find a significant coefficient of 0.007 – two to three times lower than estimates not controlling for firm composition.

Suggested Citation

  • Pauline Carry & Benny Kleinman & Elio Nimier-David, 2025. "Location Effects or Sorting? Evidence from Firm Relocation," Working Papers 662, Princeton University, Department of Economics, Industrial Relations Section..
  • Handle: RePEc:pri:indrel:662
    as

    Download full text from publisher

    File URL: https://irs.princeton.edu/publications/working-papers/662
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:indrel:662. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/irprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.