URBAN AND INDUSTRIAL AGGLOMERATION: EFFECTS ON REGIONAL LABOUR MARKETS

The “size” effect, related to the dimension of regional labour market, is often attributed to the presence of productive specialization area and industrial agglomeration. In this paper, we study separately agglomeration effects due to high concentration of population and those due to firm’s clusters or high presence of employees. We estimate the correlation between unemployment and agglomeration at disaggregated territorial level (Nuts 2), conditioning for covariates related to demographic, economic and geographical effects, including those related to core-periphery approach. Moreover, regional labour markets are spatial correlated within contiguous areas: we carefully model the presence of spatial correlation by a spatial lag model. We expected that the size effect is lower in Europe than in USA. Nevertheless, effects related to agglomeration of firms could be higher than effects related to agglomeration of people. Early results show that urban agglomeration in Europe has a negative effect on employment; the results are opposite for industrial clusters, where the presence of firm’s agglomeration has a positive effect on labour markets