Spatial occupational structure and local human capital spillover effects in Britain

Employment polarisation in developed countries has been of central focus for research and policy circles. An important question that has not been explored extensively is the spatial dimension of this polarization and the underlying processes that generate it. This is the main research topic of this thesis and is examined empirically for Britain over three papers. The first paper examines the spatial patterns of employment polarisation for Britain in the past decade. Econometric techniques are used to investigate whether employment polarisation happens within regions or just across regions and whether it is a predominantly urban phenomenon. The main result found is that all regions experience some degree of employment polarisation during the 1990s. Remarkably, London appears unique in terms of the magnitude of its employment polarisation. It experiences disproportionately higher growth in the employment share of both high- paid jobs and low-paid jobs compared to the other regions. Amongst the various proposed explanations for employment polarisation, the consumer demand mechanism has been relatively under-researched. According to this account, the presence of high educated, high income individuals in a locality boosts the demand for local low-skill, low-pay services. Since these services are non-traded and given an upward sloping labour supply, the increased labour demand would induce an upward effect on the wages and employment of the relevant low-pay occupations in the localities with higher human capital. In that context, the second and the third paper of the thesis examine how high human capital in a locality affects the labour market outcomes of the individuals of the locality in terms of wages and employment respectively. Different econometric specifications are employed in order to shed light on the positive effect found and discern the existence of a consumer demand mechanism in contrast to plausible production driven accounts (productivity spillovers and production complementarities). The strong significant effect on the local low-skill individuals compared to the other skill groups is suggested as preliminary evidence of the existence of the consumer demand mechanism