Good Firms, Worker Flows and Local Productivity

Michel Serafinelli

Working Papers from University of Toronto, Department of Economics

Abstract: A clear consensus has emerged that agglomeration economies are an important factor explaining why firms cluster next to each other. Yet, because of non-trivial measurement challenges, disagreement remains over the sources of these agglomeration effects. This paper is the first to present direct evidence showing how localized knowledge spillovers arise from workers changing jobs within the same local labor market. Specifically, I assess the extent to which firm-to-firm labor mobility enhances the productivity of firms located near highly productive firms. Using a unique dataset combining Social Security earnings records and balance sheet information for Veneto, a region in Italy with many successful industrial clusters, I first identify a set of highly productive firms, then show that hiring workers with experience at these firms significantly increases the productivity of other firms. To address identification threats arising from both contemporaneous and future unobservable firm-level productivity shocks correlated with hiring, I use control function methods drawn from the productivity literature and a novel instrumental variable strategy, which exploits downsizing events at highly productive firms. My findings imply that worker flows can explain around 10 percent of the productivity gains experienced by incumbent firms when new highly productive firms are added to a local labor market.

Keywords: productivity; agglomeration economies; local knowledge spillovers; linked employer-employee data; labor mobility; instrumental variable. (search for similar items in EconPapers)
JEL-codes: D24 J31 J60 R10 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2015-04-29
New Economics Papers: this item is included in nep-bec, nep-eff, nep-geo, nep-lma and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Working Paper: 'Good' Firms, Worker Flows and Local Productivity (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-538

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