Labor Market Pooling Research Articles

Agglomeration, job flows and unemployment

This paper examines how job flows and unemployment vary across regions in the context of a New Economic Geography (NEG) model with equilibrium employment. The in-migration that results from agglomeration economies leads to higher rates of both job creation and job destruction. In-migration also leads to lower rates of unemployment suggesting that the regional effects of job creation on unemployment dominate those of job destruction, a result consistent with empirical evidence. Since higher rates of job destruction correspond to higher productivity the results demonstrate that a NEG model can provide a microfoundation for labor market pooling.

In search of natural resource-based economies: the case of the Seine estuary (France)

Industry represents about 31% of the upper Normandy region total value-added against 19.5% at national level. The same holds for the employment, since industry accounts for 21% of total local jobs, against 18% at national level. This article attempts to answer the following question: can we explain this specific concentration of economic activity by the natural advantages (water availability, easy access by water) provided by the Seine Estuary? We first characterize “strongly Seine Estuary-dependent” industrial sectors, using simple indicators such as water withdrawals and pollution emissions. Then, we evaluate the influence of these sectors on the forces (labor market pooling, input sharing and knowledge spillovers) that lead to concentration of the economic activity in the Seine estuary. We find strong evidence that this economic activity is still natural resource based.

What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns

Many industries are geographically concentrated. Many mechanisms that could account for such agglomeration have been proposed. We note that these theories make different predictions about which pairs of industries should be coagglomerated. We discuss the measurement of coagglomeration and use data from the Census Bureau's Longitudinal Research Database from 1972 to 1997 to compute pairwise coagglomeration measurements for U.S. manufacturing industries. Industry attributes are used to construct measures of the relevance of each of Marshall's three theories of industry agglomeration to each industry pair: (1) agglomeration saves transport costs by proximity to input suppliers or final consumers, (2) agglomeration allows for labor market pooling, and (3) agglomeration facilitates intellectual spillovers. We assess the importance of the theories via regressions of coagglomeration indices on these measures. Data on characteristics of corresponding industries in the United Kingdom are used as instruments. We find evidence to support each mechanism. Our results suggest that input-output dependencies are the most important factor, followed by labor pooling.

Labor Market Pooling, Outsourcing and Contracts in Chamberlinian Regions

Economic regions, such as urban agglomerations, face external demand and price shocks that produce income risk. Workers in large and diversified agglomerations may benefit from reduced wage volatility, while firms may outsource the production of intermediate goods and realize benefits from Chamberlinian externalities. Firms may also protect workers from wage risks through fixed wage contracts. This paper explores the relationships between firms' risks, workers' contracts, and the structure of production in cities.

Patent Citations and the Geography of Knowledge Spillovers: A Reassessment

Adam B. Jaffe, Manuel Trajtenberg, and Rebecca Henderson (1993) developed a matching method to study the geography of knowledge spillovers using patent citations, and found that knowledge spillovers are strongly localized. Their method matches each citing patent to a non-citing patent intended to control for the pre-existing geographic concentration of production. We show how the method of selecting the control group may induce spurious evidence of localized spillovers. This paper reassesses their findings using control patents selected under different criteria. Doing so eliminates evidence of strong intra-national localization effects at the state and metropolitan levels, but leaves largely unaffected evidence of international localization effects. A revival of interest in economic geography during the last decade has renewed efforts at measuring location-specific externalities. These efforts have largely been guided by Alfred Marshall’s (1920) three explanations for agglomeration economies: labor market pooling, scale economies in the provision of intermediate goods and services, and localization of knowledge spillovers. Perhaps because, as Paul R. Krugman (1991, p. 53) has argued, “knowledge flows. . . are invisible; they leave no paper trail by which they may be measured and tracked,” the measurement of knowledge spillovers has proved the most challenging task. The challenge was taken up most prominently by Jaffe et al. (1993, hereafter JTH), who pointed out that knowledge spillovers may well leave a paper trail in the citations to prior art recorded in patents. Moreover, because patents record the residence of the inventors, they are an invaluable resource for studying how knowledge flows are affected by geography. JTH undertook the considerable task of constructing a large dataset of patents and matching the locations of their inventors to the locations of inventors of all patents that subsequently cited them as prior art. Of course, such an exercise would be futile unless one could also control for the existing geographic distribution of production. Patents linked by citation presumably not only share a technology, but are often developed by inventors working in a common industry. Patents linked by citation are therefore much more likely to share a geographic location than are a pair of patents drawn at random from the entire pool, but the observation tells us nothing about knowledge flows. JTH’s important innovation was to construct a control group to mimic the existing geography of production. JTH constructed three patent samples: a set of originating patents, a set of citing patents which referenced one of the originating patents, and a set of control patents matched to each citing patent. Each control patent shared the same technology class and (approximate) application date as its matched citing patent, but did not reference the matched originating patent. JTH’s experiment compared the probabilities that the citing patent, and its matched control patent, were filed by inventors living in the same geographic location as the originating patent. The experiment yielded remarkable evidence that * Thompson: Department of Economics, Florida International University, Miami, FL 33199 (e-mail: peter. thompson2@fiu.edu); Fox-Kean: Department of Economics, University of Houston, Houston, TX, 77204-5882 (e-mail: mefox@mail.uh.edu). We have benefited from insightful comments from three anonymous referees. This research was supported by the National Science Foundation under Grant No. SBR-0296192. 1 Or perhaps this is because Marshall himself seemed less than convinced that knowledge spillovers would be localized: “Many of those economies in the use of specialized skill and machinery which are commonly regarded as within the reach of very large establishments do not depend on the size of individual factories. Some depend on the aggregate volume of production of the kind in the neighborhood; while others again, especially those connected with the growth of knowledge and the progress of the industrial arts, depend chiefly on the aggregate volume of production in the whole civilized world” (Marshall, 1920, Book IV, p. 220).

Innovation and employment growth in industrial clusters: evidence from aeronautical firms in Germany*

This article investigates the impact of various agglomeration forces on employment and innovation for a sample of aeronautical cluster firms in Northern Germany and a control group of geographically dispersed aeronautical firms in other German regions. The findings suggest that employment growth is positively affected by labor market pooling but this effect is not cluster‐specific. The firms' probability of innovating is positively influenced by knowledge flows from proximate scientific institutions and public information sources as well as demanding local customers. However, only the effect of demanding customers is cluster‐specific.

Knife-Edge or Plateau: When Do Market Models Tip?

This paper studies whether agents must agglomerate at a single location in a class of models of two-sided interaction. In these models there is an increasing returns effect that favors agglomeration, but also a crowding or market-impact effect that makes agents prefer to be in a market with fewer agents of their own type. We show that such models do not tip in the way the term is commonly used. Instead, they have a broad plateau of equilibria with two active markets, and tipping occurs only when one market is below a critical size threshold. Our assumptions are fairly weak, and are satisfied in Krugman's model of labor market pooling, a heterogeneous-agent version of Pagano's asset market model, and Ellison, Fudenberg, and Möbius' model of competing auctions.

Does Geographic Proximity Matter? Evidence from Clustered and Non-clustered Aeronautic Firms in Germany

L UBLINSKI A. E. (2003) Does geographic proximity matter? Evidence from clustered and non-clustered aeronautic firms in Germany, Reg. Studies 37 , 453-467. This paper analyses what types of inter-firm linkages are stronger between geographically proximate firms compared to distant firms. It compares survey results of clustered and dispersed firms in the German aeronautic (supplying) industry. Results show that geographic proximity is relevant and statistically significant for inter-firm linkages that may lead to the following effects: labour market pooling; knowledge spillovers; demanding local customers; and trust-based effects. All in all, results suggest that if agglomerative advantages are at work they are, at best, operating weakly. However, the results of this case study are not sufficient to confirm or disprove the theoretical arguments of agglomeration advantages. L UBLINSKI A. E. (2003) La proximité géographique, est-elle importante?: des preuves provenant des entreprises aéronautiques regroupées et dispersées en Allemagne, Reg. Studies 37 , 453-467. Cet article cherche à analyser quelles sortes de liens interentreprises sont plus fortes pour ce qui est des entreprises à proximité par rapport aux entreprises à distance. On compare les résultats provenant des enquêtes auprès des entreprises aéronautiques (fournisseurs) regroupées et dispersées en Allemagne. Les résultats laissent voir que la proximité géographique est pertinente et statistiquement importante pour ce qui est des liens interentreprises qui pourraient entraîner les effets suivants: la mise en commun des bassins d'emploi, les retombé es de connaissances, les clients locaux exigeants, et les effets fondés sur la notion de confiance. A tout prendre, les résultats de cette étude de cas ne suffisent pas pour confirmer ou réfuter les arguments thé oriques sur les avantages d'agglomération. L UBLINSKI A. E. (2003) Ist geographische Nähe von Bedeutung? Beweise von clusterartig und nicht clusterartig auftretenden Flugzeugbaufirmen in Deutschland, Reg. Studies 37 , 453-467. Dieser Aufsatz analysiert und vergleicht Typen der Firmenverknüpfungen zwischen geographisch benachbarten und weiter von einander entfernten Firmen bezüglich der Intensität ihrer Verbindungen. Er vergleicht Untersuchungsergebnisse zwischen clusterartig und verstreut angesiedelten Firmen der deutschen, die Luftfahrt beliefernden Industrien. Die Ergebnisse zeigen, daß geographische Nähe von Bedeutung, und statistisch signifikant für Firmenverknüpfungen ist, die zu folgenden Wirkungen führen können: Schaffung eines Bestandes von Arbeitskräften, Verbreitung von Kenntnissen, anspruchsvolle Kundschaft am Orte und auf Vertrauen begründete Wirkungen. Alles in allem, legen die Ergebnisse nahe, daß Ballungsvorteile, sofern sie überhaupt am Werke sind, sich bestenfalls nur schwach auswirken. Die Ergebnisse dieser Fallstudie reichen jedoch nicht aus, die theoretischen Argumente der Ballungsvorteile zu bestätigen oder zu widerlegen.

Labour Market Pooling: Evidence from Italian Industrial District

Labour Market Pooling: Evidence from Italian Industrial District

Knife Edge or Plateau: When Do Market Models Tip?

This paper studies whether agents must agglomerate at a single location in a class of models of two-sided interaction. In these models there is an increasing returns effect that favors agglomeration, but also a crowding or market-impact effect that makes agents prefer to be in a market with fewer agents of their own type. We show that such models do not tip in the way the term is commonly used. Instead, they have a broad plateau of equilibria with two active markets, and tipping occurs only when one market is below a critical size threshold. Our assumptions are fairly weak, and are satisfied in Krugman's [1991b] model of labor market pooling, a heterogeneous-agent version of Pagano's [1989] asset market model, and Ellison, Fudenberg and Moebius's [2002] model of competing auctions.

Labor Market Pooling

The paper provides an empirical investigation of labor market pooling. The analysis concentrates on Italian industrial districts and shows that there is scattered evidence of a widespread wage premium. In particular, there is no evidence of district differentials for the returns to seniority while there is evidence of negative differentials for the returns to education. Moreover, dwelling in a district has no impact on the probability of being self-employed and only a minor impact on the likelihood of transiting from wage-and-salary to self-employment. Finally, there is no evidence of higher district worker mobility across jobs.

Labor Market Pooling

Labor Market Pooling

The Determinants of Agglomeration

This paper examines the microfoundations of agglomeration economies for U.S. manufacturing industries. Using industries as observations, we regress the Ellison–Glaeser (G. Ellison and E. Glaeser, 1997, J. Polit. Econ.105, 889–927) measure of spatial concentration on industry characteristics that proxy for the presence of knowledge spillovers, labor market pooling, input sharing, product shipping costs, and natural advantage. The analysis is conducted separately at the zipcode, county, and state levels. Results indicate that proxies for labor market pooling have the most robust effect, positively influencing agglomeration at all levels of geography. Proxies for knowledge spillovers, in contrast, positively affect agglomeration only at the zipcode level. Reliance on manufactured inputs or natural resources positively affects agglomeration at the state level but has little effect on agglomeration at lower levels of geography. The same is true for the perishability of output, a proxy for product shipping costs.

Externalities and Cities

This paper quantifies industry-specific spatial attenuation of agglomeration economies by taking advantage of unique geocoded administrative data on the universe of Chinese manufacturing firms. The estimates of industry-level attenuation speed further allow us to systematically assess the goodness of fit of various spatial decay functional forms and to evaluate the micro-foundations that govern the decay patterns across industries. We obtain three main findings. First, agglomeration spillovers attenuate by about 90 percent on average from 0–1 km to 1–5 km in China, with large heterogeneity in the extent of attenuation ranging from 73 percent to 116 percent across industries. Second, the spatial decay speed is positively linked with proxies for knowledge spillovers and labor market pooling but is negatively linked with proxies for input sharing and the share of the state sector. Last, the inverse square distance decay function presents the best goodness of fit among the tested functional forms.