IDEAS home Printed from https://ideas.repec.org/p/ehl/lserod/42670.html
   My bibliography  Save this paper

The spatial sorting and matching of skills and firms

Author

Listed:
  • Mion, Giordano
  • Naticchioni, Paolo

Abstract

In this paper we make use of a matched employer-employee database for Italy to look at the spatial distribution of wages. Using this rich database we aim to open up the black box of agglomeration economies exploiting the micro dimension of interaction among economic agents, both individuals and firms. We provide evidence that firm size and, especially, skills are sorted across space and account for a large portion of the spatial wage variation. Our data also support the assortative matching hypothesis, which we show not to be driven by co-location of good workers and firms. Finally, we point out that assortative matching is negatively related to local market size.

Suggested Citation

  • Mion, Giordano & Naticchioni, Paolo, 2009. "The spatial sorting and matching of skills and firms," LSE Research Online Documents on Economics 42670, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:42670
    as

    Download full text from publisher

    File URL: http://eprints.lse.ac.uk/42670/
    File Function: Open access version.
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 245-276.
    2. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-656, September.
    3. Combes, Pierre-Philippe & Lafourcade, Miren, 2001. "Transport Cost Decline and Regional Inequalities: Evidence from France," CEPR Discussion Papers 2894, C.E.P.R. Discussion Papers.
    4. repec:iab:iabfme:200603(en is not listed on IDEAS
    5. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, April.
    6. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
    7. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 377-393, May.
    8. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    9. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 77-108.
    10. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    11. Cornelißen, Thomas, 2006. "Using Stata for a memory saving fixed effects estimation for the three-way error component model," FDZ Methodenreport 200603_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
    13. Pines,David & Sadka,Efraim & Zilcha,Itzhak (ed.), 1998. "Topics in Public Economics," Cambridge Books, Cambridge University Press, number 9780521561365, January.
    14. Borjas, George J. & Bronars, Stephen G. & Trejo, Stephen J., 1992. "Self-selection and internal migration in the United States," Journal of Urban Economics, Elsevier, vol. 32(2), pages 159-185, September.
    15. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the ‘New Economic Geography’," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, August.
    16. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
    17. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    18. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521871525, January.
    19. Mion, Giordano & Naticchioni, Paolo, 2005. "Urbanization Externalities, Market Potential and Spatial Sorting of Skills and Firms," CEPR Discussion Papers 5172, C.E.P.R. Discussion Papers.
    20. Wheeler, Christopher H, 2001. "Search, Sorting, and Urban Agglomeration," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 879-899, October.
    21. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    22. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    23. John M. Abowd (corresponding) & Francis Kramarz, 2004. "Are Good Workers Employed by Good Firms? A Simple Test of Positive Assortative Matching Models," Econometric Society 2004 North American Winter Meetings 385, Econometric Society.
    24. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    25. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Trade costs, firms and productivity," Journal of Monetary Economics, Elsevier, vol. 53(5), pages 917-937, July.
    26. Head, Keith & Mayer, Thierry, 2006. "Regional wage and employment responses to market potential in the EU," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 573-594, September.
    27. Paolo Naticchioni & Demian Panigo, 2004. "Employment protection, job-tenure and short term mobility wage gains - A new explanation for the Italian case," Working Papers - Dipartimento di Economia 4-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2004.
    28. Sabrina Di Addario & Eleonora Patacchini, 2006. "Is there an urban wage premium in Italy?," Temi di discussione (Economic working papers) 570, Bank of Italy, Economic Research and International Relations Area.
    29. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
    30. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171, Elsevier.
    31. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July.
    32. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
    33. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    34. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    35. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    36. Combes, Pierre-Philippe, 2000. "Economic Structure and Local Growth: France, 1984-1993," Journal of Urban Economics, Elsevier, vol. 47(3), pages 329-355, May.
    37. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
    38. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
    39. Cingano, Federico, 2003. "Returns to specific skills in industrial districts," Labour Economics, Elsevier, vol. 10(2), pages 149-164, April.
    40. repec:rus:hseeco:122439 is not listed on IDEAS
    41. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117, Elsevier.
    42. Panigo, Demian & Naticchioni, Paolo, 2004. "Employment protection, job-tenure and short term mobility wage gains," CEPREMAP Working Papers (Couverture Orange) 0402, CEPREMAP.
    43. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
    44. Jeffrey R. Campbell & Hugo A. Hopenhayn, 2005. "Market Size Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 53(1), pages 1-25, March.
    45. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
    46. Redding, Stephen & Schott, Peter K., 2003. "Distance, skill deepening and development: will peripheral countries ever get rich?," Journal of Development Economics, Elsevier, vol. 72(2), pages 515-541, December.
    47. Krueger, Alan & Rouse, Cecilia, 1998. "The Effect of Workplace Education on Earnings, Turnover, and Job Performance," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 61-94, January.
    48. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    49. Blundell,Richard & Newey,Whitney K. & Persson,Torsten (ed.), 2006. "Advances in Economics and Econometrics," Cambridge Books, Cambridge University Press, number 9780521692083, January.
    50. repec:hal:wpspec:info:hdl:2441/10192 is not listed on IDEAS
    51. Henderson, J. Vernon, 2003. "Marshall's scale economies," Journal of Urban Economics, Elsevier, vol. 53(1), pages 1-28, January.
    52. Moretti, Enrico, 2004. "Human capital externalities in cities," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 51, pages 2243-2291, Elsevier.
    53. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April.
    54. Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," Econometrica, Econometric Society, vol. 70(6), pages 2367-2420, November.
    55. George J. Borjas, 2021. "Self-Selection and the Earnings of Immigrants," World Scientific Book Chapters, in: Foundational Essays in Immigration Economics, chapter 4, pages 69-91, World Scientific Publishing Co. Pte. Ltd..
    56. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    57. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Firms in the European Union," Post-Print hal-00267438, HAL.
    58. Masson,Paul R. & Taylor,Mark P. (ed.), 1993. "Policy Issues in the Operation of Currency Unions," Cambridge Books, Cambridge University Press, number 9780521434553, January.
    59. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    60. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
    61. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214, Elsevier.
    62. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8grh35j2 is not listed on IDEAS
    63. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    64. Henderson, Vernon & Kuncoro, Ari & Turner, Matt, 1995. "Industrial Development in Cities," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1067-1090, October.
    65. Tabuchi, Takatoshi & Yoshida, Atsushi, 2000. "Separating Urban Agglomeration Economies in Consumption and Production," Journal of Urban Economics, Elsevier, vol. 48(1), pages 70-84, July.
    66. O. Ashenfelter & D. Card (ed.), 1999. "Handbook of Labor Economics," Handbook of Labor Economics, Elsevier, edition 1, volume 3, number 3.
    67. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-1357, September.
    68. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
    69. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    70. Samuel Bentolila & Juan J. Dolado, 1994. "Labour Flexibility and Wages: Lessons from Spain," Working Papers wp1994_9406, CEMFI.
    71. Baldwin, Richard & Okubo, Toshihiro, 2004. "Heterogeneous Firms, Agglomeration and Economic Geography: Selection and Sorting," CEPR Discussion Papers 4602, C.E.P.R. Discussion Papers.
    72. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
    73. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June.
    74. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    75. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July.
    2. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    3. Alessia Matano & Paolo Naticchioni, 2009. "Wage distribution and the spatial sorting of workers and firms," Working Papers - Dipartimento di Economia 8-DEISFOL, Dipartimento di Economia, Sapienza University of Rome, revised 2009.
    4. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853, Elsevier.
    5. Stephen J. Redding, 2013. "Economic Geography: A Review of the Theoretical and Empirical Literature," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 16, pages 497-531, Palgrave Macmillan.
    6. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 171-245, Elsevier.
    7. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2011. "The identification of agglomeration economies," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 253-266, March.
    8. Kristian Behrens & Frédéric Robert‐Nicoud, 2009. "Krugman's Papers in Regional Science: The 100 dollar bill on the sidewalk is gone and the 2008 Nobel Prize well‐deserved," Papers in Regional Science, Wiley Blackwell, vol. 88(2), pages 467-489, June.
    9. Behrens, Kristian & Robert-Nicoud, Frédéric, 2008. "Survival of the fittest in cities: agglomeration, selection, and polarisation," LSE Research Online Documents on Economics 28506, London School of Economics and Political Science, LSE Library.
    10. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
    11. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    12. Stef Proost & Jacques-François Thisse, 2019. "What Can Be Learned from Spatial Economics?," Journal of Economic Literature, American Economic Association, vol. 57(3), pages 575-643, September.
    13. repec:esx:essedp:729 is not listed on IDEAS
    14. Békés, Gábor & Harasztosi, Péter, 2013. "Agglomeration premium and trading activity of firms," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 51-64.
    15. Gordon H. Hanson, 2000. "Scale Economies and the Geographic Concentration of Industry," NBER Working Papers 8013, National Bureau of Economic Research, Inc.
    16. Stephen J. Redding, 2010. "The Empirics Of New Economic Geography," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 297-311, February.
    17. William C. Strange, 2009. "Viewpoint: Agglomeration research in the age of disaggregation," Canadian Journal of Economics, Canadian Economics Association, vol. 42(1), pages 1-27, February.
    18. Diego Puga, 2010. "The Magnitude And Causes Of Agglomeration Economies," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 203-219, February.
    19. Fu, Shihe, 2007. "Smart Cafe Cities: Testing human capital externalities in the Boston metropolitan area," Journal of Urban Economics, Elsevier, vol. 61(1), pages 86-111, January.
    20. Edward L. Glaeser & Joshua D. Gottlieb, 2009. "The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 983-1028, December.
    21. Henry Overman & Patricia Rice & Anthony Venables, 2010. "Economic Linkages across Space," Regional Studies, Taylor & Francis Journals, vol. 44(1), pages 17-33.

    More about this item

    Keywords

    spatial externalities; individual panel-data; skills; firms’ heterogeneity; sorting; assortative matching;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:42670. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: LSERO Manager (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.