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An Empirical Index for Labor Market Density

Pieter Gautier () and C. N. Teulings ()

The Review of Economics and Statistics, 2003, vol. 85, issue 4, 901-908

Abstract: We derive a structural index for labor market density based on the Ellison-Glaeser index for industry concentration. The labor market density index serves as a proxy for the number of workers that are potentially available for jobs in a particular area. The index is based on observed home-work location patterns. It is particularly useful for testing theories where the scale of the market matters. We apply this index to a standard wage equation and find that it explains almost half of the cross-region wage variance. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2003
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The Review of Economics and Statistics is currently edited by Amitabh Chandra, Olivier Coibion, Bryan S. Graham, Shachar Kariv, Amit K. Khandelwal, Asim Ijaz Khwaja, Brigitte C. Madrian and Rohini Pande

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