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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