Job Categories and Geographic Identity

Abstract

Many previous explanations which explain geographic concentration of industries propose what I refer to as supply-side advantages to firms which co-locate geographically. I, instead, suggest an alternative, demand-side mechanism. I argue that in labor markets, particular types of work become associated with specific geographical locations. This association becomes a categorical stereotype – which leads buyers in markets to prefer sellers from particular geographic regions, merely because they seem more legitimate. I test this theory in an online marketplace for freelancing services – a market which should not exhibit effects of alternative, more economically based, agglomeration mechanisms. I find that the greater the association between a particular job category and a geographic location – what I term geographic identity – the more likely any freelancer from that country will win a job in that category. This effect holds net of other explanations such as experience and price.