Urban versus Rural Firms: Does Location Affect Labor Demand?

Jean-Pierre Huiban

Growth and Change, 2009, vol. 40, issue 4, 649-672

Abstract: A dynamic labor demand model is developed and estimated on 1,719 French firms in the food industries, observed over the period 1990–1997. Both descriptive statistics and estimation results (including GMM estimations) show that labor demand and its determinants vary according to firm location. Rural areas are characterized by a low adjustment speed and great sensitivity of labor demand to the labor cost. Peri‐urban areas benefit from important economies of scale effects and from technological spillovers. Urban firms are faced with a decline in employment levels, which is mostly due to a faster adjustment of employment to the level of activity. The trade‐off between agglomeration and congestion forces may explain the respective situations of both urban and periurban areas. However, the relative inertia that appears in rural areas may be analyzed in a different way, by considering the smaller number of potential opportunities that exist in these areas.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:bla:growch:v:40:y:2009:i:4:p:649-672

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