Urban versus rural firms: is there a spatial heterogeneity of labour demand?

This paper analyses the spatial heterogeneity of labour demand. Our main assumption is that for each location there is a combination of factors which is the most efficient, given the endowment of the location in terms of technology access and the relative cost of factors. We estimate our model using a panel of more than 1000 industrial firms over a six-year period. The contribution of skilled labour is emphasised in the firms located in urban areas, unskilled labour in rural firms, and capital in periurban units. The functional distribution of jobs also plays a discriminating role: direct production and similar functions seem to be more concentrated in periurban and rural areas, whereas tertiary functions are clearly assigned to urban units. We then make conclusions as to the existence of different technical paths of growth, with high productivity growth and a dramatic decline of demand for unskilled labour in urban areas, and the maintenance of a labour-intensive method of production in rural areas.