Working Paper: CEPR ID: DP7174
Authors: Henry G. Overman; Diego Puga
Abstract: We provide empirical evidence on the role of labour market pooling in determining the spatial concentration of UK manufacturing establishments. This role arises because large concentrations of employment iron out idiosyncratic shocks and improve establishments' ability to adapt their employment to good and bad times. We measure the likely importance of labour pooling by calculating the fluctuations in employment of individual establishments relative to their sector and averaging by sector. Our results show that sectors whose establishments experience more idiosyncratic volatility are more spatially concentrated, even after controlling for a range of other industry characteristics that include a novel measure of the importance of localized intermediate suppliers.
Keywords: Labour market pooling; Spatial concentration
JEL Codes: R12; R30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| idiosyncratic employment shocks (J69) | adjustments in employment levels at individual establishments (J63) |
| adjustments in employment levels at individual establishments (J63) | spatial distribution of these establishments (R32) |
| idiosyncratic employment shocks (J69) | spatial concentration of sectors (R32) |
| labour pooling (J68) | spatial concentration of manufacturing establishments (R32) |