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Will there be a concentration of alikes? The impact of labor market structure on industry mix in the presence of product market shocks

Author

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  • Stahl, Konrad O.
  • Walz, Uwe

Abstract

We analyze determinants of regional industry mix and focus especially on the influence of labor market characteristics. By combining a labor market pooling argument with an argument involving the cost of switching a worker from one firm to another, we show that in the presence of product market shocks there exists an interesting trade-off for the concentration of firms of the same industry in one region. Firms belonging to different industries are hedged against industry-specific shocks if they settle in the same region, but face higher switching costs (retraining costs for workers moving from one firm to another). In addition, with a given supply of labor there is an additional rationing effect affecting the location decisions of firms. Against the background of these trade-offs we analyze the resulting location decisions of firms in a two-regions-two-industry-four-firm framework. We analyze the impact of different parameters on the location choice of firms.

Suggested Citation

  • Stahl, Konrad O. & Walz, Uwe, 2001. "Will there be a concentration of alikes? The impact of labor market structure on industry mix in the presence of product market shocks," HWWA Discussion Papers 140, Hamburg Institute of International Economics (HWWA).
  • Handle: RePEc:zbw:hwwadp:26362
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    Citations

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    Cited by:

    1. Gerlach, Heiko & Rønde, Thomas & Stahl, Konrad, 2009. "Labor pooling in R&D intensive industries," Journal of Urban Economics, Elsevier, vol. 65(1), pages 99-111, January.
    2. 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.
    3. Combes, Pierre-Philippe & Duranton, Gilles, 2006. "Labour pooling, labour poaching, and spatial clustering," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 1-28, January.
    4. Christoph Alsleben, 2005. "The Downside of Knowledge Spillovers: An Explanation for the Dispersion of High-tech Industries," Journal of Economics, Springer, vol. 84(3), pages 217-248, May.
    5. Gerlach, Heiko A. & Rønde, Thomas & Stahl, Konrad O., 2008. "Labor Pooling in R&D Intensive Industries," ZEW Discussion Papers 08-074, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    local labor market; product market shocks; industry structure; imperfect competition;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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