Michael Moritz (p), Anja Rossen, Wolfgang Dauth

Andrea Caragliu

Significant spatial wage disparities can be observed in virtually all countries with free market economies. In particular, larger cities offer higher wages compared to more rural areas. There are at least two major explanations for this observation: (1) people with characteristics that are related to higher wages prefer to live in larger cities and (2) the same worker becomes more productive if she or he is located in a larger rather than a smaller city. In this paper, we shed light on the relative importance of those explanations and demonstrate that, after controlling for worker and industry sorting, there is still a significant agglomeration effect that makes wages increase with the size of local industries. We find that, aggregated to the region-industry level, 21.8 percent of the variation of wages in a full sample of all workers subject to social security in Germany for the years 2011-19 can be attributed to factors that are specific to region/industry-cells. Furthermore, the region/industry-specific wage component increases with the share of workers in this cell with an elasticity of 0.04, which provides evidence for the existence of agglomeration effects. We contribute to the literature on spatial wage disparities in at least three ways. First, we demonstrate how the wage decomposition by Card, Rothstein, and Yi (CRY) can be adapted to measure the magnitude of Marshall-Arrow-Romer-type agglomeration effects. Second, we discuss the intermediate results of industry- and region-specific wage premia. Those premia reveal the various sources of spatial wage disparities and are informative to (local) policymakers. Finally, we measure the relative magnitude of four different mechanisms that explain spatial wage disparities.

Kamila Borsekova (p), Hans Westlund, Samuel Korony

Michael Moritz

This paper investigates the dynamics of regional labour market efficiency within the European Union (EU) from 2010 to 2019, focusing on patterns of convergence, divergence, and stagnation. Utilizing both beta and sigma convergence concepts, the study analyses seven labour market efficiency indicators from the Regional Competitiveness Index. The dataset encompasses all EU NUTS 2 regions, categorized into two groups based on fixed categorical factors, reflecting path dependencies.
Our findings reveal that EU NUTS 2 regions exhibit absolute beta convergence in long-term unemployment, overall unemployment rate, and gender-balanced unemployment. However, sigma convergence analysis points to a significant divergence in the unemployment rate, labour productivity, and female unemployment. Notably, the employment rate demonstrates stagnation in terms of both beta and sigma convergence. In post-socialist regions, there is significant beta convergence in various indicators, including long-term unemployment, unemployment rate, labour productivity, gender balance in unemployment, and female unemployment. Conversely, capitalist regions show convergence in long-term unemployment, unemployment rate, and gender balance in unemployment, with a notable divergence in employment rate.
Regression analysis reveals distinct trends between post-socialist and capitalist regions, particularly in employment rate, gender balance unemployment, and female unemployment. The study concludes that post-socialist regions generally exhibit better convergence performance. Nonetheless, it underscores the complexity of convergence trends across different indicators and highlights the necessity of long-term policy initiatives and broad access to diverse higher education opportunities as key measures for fostering labour market convergence in the EU.

Ricardo Biscaia (p), Adriana Inácio

Kamila Borsekova

Higher Education systems are deemed to be very stratified, with some institutions perceived as being better placed in the systems than others. Even if we assume that Higher Education Institutions are equal, the perception of reputation still affects decisions through two channels of events: Firstly, in access to Higher Education, as future students aim at enrolling in better institutions; and secondly, at the entry to the labour market, where high-level employers seeks future graduate workers from high-tier institutions.
Benefiting from a dataset of 18000 graduates in the Portuguese HE system, the paper has the objective of analyzing the labor market trajectories of the students to understand the role of stratification in the Portuguese labor market. Through a regression analysis, the quality of the job placement of each graduate is analysed and the effect of the origin of each higher education institution is the central explanatory variable. Important control variables are used such as the grades of the student in high school, in higher education to control for the ability of the student before entering, and variables such as satisfaction with the degree control for the quality of the degree. The analysis is complemented with field-level fixed effects. Then, the role of graduates mobility in explaining this result is addressed, as more mobile graduates are probably more capable of exploiting more their stratification advantages better than non-mobile graduates.

Andrea Caragliu (p), Martijn Smit, Frank Van Oort

Ricardo Biscaia

The nature of agglomeration economies has been mostly analyzed in terms of the productive advantages accruing to firms deciding to locate in major urban areas. However, over the past couple of decades large cities, especially those located in developed countries, witnessed a substantial relocation pattern whereby productive plants fled urban areas, seeking to minimize high rent costs, and relocated productive activities to areas characterized by lower wage bills. Therefore, the usual empirical toolbox to explain the nature and rationale of large cities appears to a degree outdated, and, most importantly, incapable of capturing the determinants and effects of agglomerative patterns we still observe in cities. These, we believe, can be explained by two competing strands of the literature: one, revived after Glaeser at al (2001) suggests an increasing relevance of consumption amenities; the other, spurred by Ellison et al. (2010), links Marshallian agglomerative forces with coagglomeration of industries.
This paper contributes to this literature with new evidence based on the universe of Dutch workers, and very large samples of Dutch firms with the aim to uncover the relationship between consumption amenities and firms coagglomerative behavior. We employ a large data set covering the period 2005 through 2011, explaining the role of consumption amenities in driving coagglomeration of Dutch firms controlling for the classical Marshallian forces of agglomeration, i.e. labor market pooling, input sharing, and knowledge spillovers. Results show that indeed consumption amenities play a major role in driving the coagglomerative behavior of firms, next to the classical Marshallian forces. Moreover, we also find evidence of a decreasing role of input sharing as a driving force of coagglomerative mechanisms, while knowledge spillovers seem to increase in importance over the observed time period.