Local Skill Concentrations and District Employment Growth: A Spatial Simultaneous Equation Approach for India

The focus of this paper is to explore the role of spatial distribution of skills in explaining differential growth rates of employment across Indian districts between the years 2001 and 2011 by using data from Census of India. To measure skills across districts, we use the skill-content of occupations and the occupational distribution of workers across districts. We then model employment and population growth simultaneously taking into account spatial correlation of the endogenous variables. We find that a one standard deviation increase in (cognitive) skills is associated with 0.52 standard deviation increase in the growth rate of male main workers and a 0.42 increase in the growth rate of male non-farm main workers. However, female employment has significantly decreased in initially skilled regions