Endogenous local labour markets, regional aggregation and agglomeration economies
Jordy Meekes () and
No 18-03, Working Papers from Utrecht School of Economics
In this paper, we examine the structure of workersâ€™ local labour market (LLM) and its economic consequences. We endogenise workersâ€™ LLM to commuting outcomes and worker characteristics. The descriptive results indicate that both male workers and high-educated workers especially are characterised by large LLMs. The empirical results show that the urban wage premium (UWP), explained by the returns to agglomeration in wages, increases by a magnitude of two to three in the level of regional aggregation. We also focus on subgroup diï¬€erentials in the returns to agglom-eration economies. High-educated workers experience a higher UWP than low-educated workers, but we find no systematic diï¬€erence between the UWP of men and women when holding the re-gional aggregation level constant. In addition, we examine the returns to agglomeration in wages and employment for workers who experienced job displacement. We show that at a relatively high level of regional aggregation, displaced workers in dense LLMs, compared to displaced workers in more sparse LLMs, experience modest losses in wages and comparable losses in employment.
Keywords: Local labour markets; Urban wage premium; Employment; Commuting; Regional aggregation; Tra (search for similar items in EconPapers)
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