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Quantifying the effect of labor market size on learning externalities

Jan Cornelius Peters

No 74, Thünen Working Papers from Johann Heinrich von Thünen Institute, Federal Research Institute for Rural Areas, Forestry and Fisheries

Abstract: We show for Germany that labor productivity as reflected in wage is, ceteris paribus, higher for workers who previously acquired work experience in rather urban labor markets with a large local workforce than in rather rural labor markets which are small in terms of regional employment. Our empirical analysis provides new evidence on the magnitude of these dynamic agglomeration gains by estimating the elasticity of wages with regard to the (cumulated) size of the local labor markets in which workers acquired experience. It shows that this elasticity increases with the level of individual experience to more than 0.06 implying that today's wage of a worker with 20 years of experience or more would be about four to five percent higher if the worker would have gained all his or her experience in local labor markets double the size of the labor markets in which he or she actually was working in the past. These identified dynamic agglomeration gains are supposed to be related to learning externalities. The analysis uses information on individual employment biographies and regional employment from 1975 onwards. The wage information refers to more than 300,000 entry wages of new employment relationships in Germany in the period 2005 to 2011. The depreciation of human capital is taken into account and that high-skilled workers presumably are the ones other workers learn the most from.

Keywords: Dynamic agglomeration economies; Human capital externalities; Learning; Regional disparities; Dynamische Agglomerationsvorteile; Humankapitalexternalitäten; Lernen; Regionale Disparitäten (search for similar items in EconPapers)
JEL-codes: R10 R23 J31 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-geo, nep-lma and nep-ure
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Related works:
Working Paper: Quantifying the effect of labor market size on learning externalities (2017) Downloads
Working Paper: Quantifying the effect of labor market size on learning externalities (2017) Downloads
Working Paper: Quantifying the effect of labor market size on learning externalities (2017) Downloads
Working Paper: Quantifying the effect of labor market size on learning externalities (2016) Downloads
Working Paper: Quantifying the effect of labor market size on learning externalities (2016) Downloads
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