Location Effects or Sorting? Evidence from Firm Relocation

Pauline Carry, Benny Kleinman and Elio Nimier-David

No 33779, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F0 J0 R0 (search for similar items in EconPapers)
Date: 2025-05
New Economics Papers: this item is included in nep-bec, nep-geo, nep-lab and nep-ure
Note: EFG ITI LS PE PR
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Citations: View citations in EconPapers (2)

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