Demographics, labor market power and the spatial equilibrium

Nina Furbach

No 2906, Working Paper Series from European Central Bank

Abstract: This paper studies how demographics affect aggregate labor market power, the urban wage premium and the spatial concentration of population. I develop a quantitative spatial model in which labor market competitiveness depends on the demographic composition of the local workforce. Using highly disaggregated administrative data from Germany, I find that firms have more labor market power over older workers: The labor supply elasticity decreases from more than 2 to 1 from age 20 to 64. Calibrating the model with the reduced-form elasticity estimates, I find that differences in labor supply elasticities across age groups can explain 4% of the urban wage premium and 2% of the spatial concentration of population. Demographics and skill together account for 10% of the urban wage premium and 2% of agglomeration. JEL Classification: J11, J31, J42, R23

Keywords: demographics; Germany; monopsonistic competition; spatial equilibrium; urban wage premium (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-com, nep-geo, nep-lma and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242906

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