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Agglomeration Effect of Skill-Based Local Labor Pooling: Evidence of South Korea

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  • Taelim Choi

    (Incheon Institute, Incheon 22711, Korea)

Abstract

Since workplace skills present diverse dimensions of a worker’s ability, it has recently received renewed interest by researchers examining the growth of cities. The purpose of the paper explores the advantage of regional concentrations of workers specialized in different types of skills. Specifically, the analysis estimates the agglomeration effects of skill-based labor pooling on wage levels and wage growth in South Korea. To this end, it constructs skill-based labor pool indices for cognitive, social, technical, and physical skills at a provincial level. The indices show an uneven geographical distribution in varying degrees across four types of skills. The regression results indicate that the urban wage premium of skill-based local labor pooling varies according to types of skills. The greatest magnitude of benefit is incurred by workers in cognitive-skill-oriented occupations and moderate benefits are found in technical- and physical-skill-oriented occupations. An urban wage premium is non-existent in social-skill-oriented occupations. In addition, the wage growth model with job mobility shows that the urban wage premium immediately affects workers who change jobs and relocate to denser areas. As high-wage occupations earn higher wage premiums when workers in these occupations are concentrated, it supports patterns of the polarization of both skills and their effects.

Suggested Citation

  • Taelim Choi, 2020. "Agglomeration Effect of Skill-Based Local Labor Pooling: Evidence of South Korea," Sustainability, MDPI, vol. 12(8), pages 1-15, April.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:8:p:3198-:d:345835
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    References listed on IDEAS

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    2. László Czaller & Zoltán Hermann, 2022. "Return to skills and urban size: Evidence from the skill requirements of Hungarian firms," CERS-IE WORKING PAPERS 2205, Institute of Economics, Centre for Economic and Regional Studies.

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