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An Empirical Index for Labor Market Density

Pieter A. Gautier1,2; Coen N. Teulings1,2

1 Tinbergen Institute · 2 Erasmus University Rotterdam

The Review of Economics and Statistics 2003 open access

We derive a structural index for labor market density based on the Ellison-Glaeser index for industry concentration. The labor market density index serves as a proxy for the number of workers that are potentially available for jobs in a particular area. The index is based on observed home-work location patterns. It is particularly useful for testing theories where the scale of the market matters. We apply this index to a standard wage equation and find that it explains almost half of the cross-region wage variance.

DOI
10.1162/003465303772815808
Volume
85 (4)
Pages
901-908
Language
en
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