Local labour markets: The causes and consequences of spatial differences in labour market outcomes across cities in France and Germany
Economic Theory
Final Report Abstract
Our project provides new methodological insights into the causes of agglomerations. In particular, we develop a better understanding of the distribution of city sizes in a country. We find that the upper tails of the city size distributions in the US and Germany, and of the firm-size distribution in France, decay like power functions. Moreover, we introduce a new statistical approach that identifies different forces behind industrial concentration. Hence, our methodological insights improve the analysis of the heterogeneity of industrial clusters across space which is relevant for policy makers because adequate policies need to be targeted to the specific type of industry concentration. Our research on agglomerative forces thus helps to better understand how policies can exert an influence on the development and type of agglomerations. This is highly relevant as the second part of our research project stresses the relevance of such differences across regions in shaping labour market outcomes, firm performance as well as workers’ labour market prospects. In particular, the heterogeneity across regions in terms of agglomeration size, type and industry composition together with the spatial immobility of workers implies that trade shocks affect workers and firms differently across space. We provide new insights on this relationship in our research project. At the regional level, we find that the net effect of outsourcing on employment in Western European local labour market crucially depends on the position of the regional economy in the value chain prior to the rise of trade with Eastern Europe and China. Moreover, turning to the firm side, we find that firms adjust outsourcing more flexibly to trade-shocks than employment, which implies that outsourcing acts as an employment-stabilizer to trade shocks. On the worker-side, we show that international trade raises gender wage gaps among skilled workers, while reducing it among unskilled workers. International trade moreover raises gender gaps in employment conditions. In particular, international trade raises formal employment more for men than for women in the tradable sector, while reducing formal employment in non-tradable sectors due to the entry of female workers in the non-tradable sector. This finding was also discussed for a broader audience in a Vox EU column (https://voxeu.org/article/gender-informal-employment-and-trade-liberalisation-mexico). Hence, our research highlights the unequal impact of trade shocks across regions and thus stresses the need to monitor the development of working conditions across different groups of workers in order to design adequate policy responses. One reason for the role of regional labour markets as a major mediator of, for instance, trade shocks, on workers’ employment outcomes is the spatial immobility of workers. A structural model of workers’ job search across space that was developed as part of the project can be used to simulate the consequences of place-based policies for location decisions. Our findings may thus guide policy makers how to exert an influence on workers’ mobility in order to mitigate negative effects of immobility in a region hit, for instance, by a trade shock.
Publications
- (2019). Classifying Industries into Types of Relative Concentration. Journal of the Royal Statistical Society, Series A, 182, Pages 1017-1037
Ludwig von Auer, Andranik Stepanyan and Mark Trede
(See online at https://doi.org/10.1111/rssa.12441) - (2019). Size Distributions Reconsidered. Econometric Reviews, 38, Pages 695-710
Christian Schluter and Mark Trede
(See online at https://doi.org/10.1080/07474938.2017.1417732) - (2020), Gender, Informal Employment and Trade Liberalization in Mexico, The World Bank Economic Review, Volume 34, Issue 2, June 2020, Pages 259–283
Ben Yahmed, Sarra and Pamela Bombarda
(See online at https://doi.org/10.1093/wber/lhy020)
