 Location Effects or Sorting? Evidence from Firm RelocationPauline Carry, Benny Kleinman and Elio Nimier-David No 21705, CEPR Discussion Papers from Centre for Economic Policy Research Abstract: What role do firms play in geographic wage disparities? This paper exploits establishment mobility as a novel source of identification to separate firm sorting from location treatment effects, i.e., the local wage premium for a given worker at a given firm (due to, e.g., geography, infrastructure, amenities). Using data from France and the U.S., we first document key facts about establishment relocation: 4% of establishments move each year, retaining their activity and structure while adjusting their workforce and wages. Combining establishment and worker mobility in France, we estimate a model that decomposes wage variation due to workers, firms, and locations. Spatial wage differences are primarily driven by sorting: worker composition accounts for 30%, firm composition for 17%, and their co-location for 34%. Residual location effects explain only 2–4%. Establishment sorting also accounts for most of the urban wage premium and the higher wage growth in larger cities. Keywords: Spatial inequality; Firm sorting; Local labour markets (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:21705 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK. |
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