Agglomeration effects in the labour market: an empirical analysis for Italy

Marusca De Castris, Guido Pellegrini


Extensive and persistent geographic variability of the unemployment rate within the same region has been attributed to various causes. Some theories identify the “thickness” of markets as the source of positive externalities affecting labour market by improving the ability to match the skills requested by firms with those offered by workers. A recent paper by Gan and Zhang (2006) empirically confirms this hypothesis for the US labour markets. Agglomeration can be defined as aggregation of people, basically measured by city size, or as aggregation of firms, measured by cluster size (employment or number of plants). However, the population location and the industrial location are by far more similar in United States than in Europe and in Italy. Our paper aims to evaluate the effects of agglomeration on the local unemployment rate. The new methodological contribution of the study is the identification of both urban and industrial cluster agglomeration effects, using a wide set of control variables. Adjusting the system for the effects of sectorial and size shocks, as well as those relating to geographic structure and policy interventions, the results of our analysis differ from that for the United States. The study stresses the presence of negative and significant urbanisation externalities. We obtain, instead, positive effects concerning the geographic agglomeration of firms, and their thickness, in a specific area. Furthermore, positive and significant effects can be found in local systems with features of a district. Finally, the model distinguishes the negative effects of urban agglomerations (in terms of population density) from positive firm’s agglomerations (in terms of density of local units).

Full Text:

PDF (English)


L. ANSELIN (1988), Spatial econometrics: methods and models, Kluwer, Dordrecht.

L. ANSELIN, A. BERA, R. FLORAX AND M. YOON (1996), Simple diagnostic tests for spatial dependence, “Regional Science and Urban Economics”, 26, 1, pp. 77-104.

G. BARBIERI, G. PELLEGRINI (2005), I Sistemi locali del lavoro: uno strumento per la politica economica in Italia e in Europa, in G. Esposito (ed.), “Scritti in onore di Antonino Giannone”, ISCONA, Roma.

G. BECATTINI, M. BELLANDI, G. DEI OTTATI, F. SFORZI (2003), From industrial districts to local development, Edward Elgar, Cheltenham.

F. BELUSSI, G. GOTTARDI, E. RULLANI (eds.) (2003), The technological evolution of industrial districts, Kluwer, Boston.

G. BODO, P. SESTITO (1991), Le vie dello sviluppo, Il Mulino, Bologna.

A. CICCONE, R. HALL (1996), Productivity and the density of economic activity, “American Economic Review”, 86, 1, pp. 54-70.

G. DE BLASIO, S. DI ADDARIO (2005), Do workers benefit from industrial agglomeration?, “Journal of Regional Science”, 45, 4, pp. 797-827.

S. DI ADDARIO, E. PATACCHINI (2005), Wages and the city: the Italian case, University of Oxford, Department of Economics, Working Paper Series, ref. 243.

S. DI ADDARIO (2005), Job search in thick markets: evidence from Italy, Oxford Department of Economics, Discussion Papers Series, n. 235.

J. P. ELHORST (2003), The mystery of regional unemployment differentials: theoretical and empirica

explanations, “Journal of Economic Surveys”, 17, 5, pp. 709-748.

L. GAN, Q. ZHAN (2006), The thick market effect on local unemployment rate fluctuations, “Journal of Econometrics”, 133, pp. 127-152.

E. GLAESER, D. MARC (2001), Cities and skill, “Journal of Labour Economics”, 19, 2, pp. 316-342.

ISTAT (1997), I sistemi locali del lavoro 1991, Roma, Istat.

A. MARSHALL (1890), The Principles of Economics, London.

G. NEUMANN, R. TOPEL (1991), Employment risk, diversification and unemployment, “Quarterly Journal of Economics”, 106, 4, pp. 1341-1365.

OECD (2002), Territorial database, source and methodology, OECD, Paris.

E. PATACCHINI, S. DI ADDARIO (2005), Agglomerazione urbana e salari in Italia, in L. BRUCCHI (eds), Temi di economia del lavoro, Il Mulino, Bologna.

G. PELLEGRINI (2001), La struttura produttiva delle piccole e medie imprese italiane: il modello dei

distretti, “Banca, Impresa e Società”, n. 2.

G. PELLEGRINI (2002), Proximity, polarization and local labour market performance, “Network and Spatial Economics”, 22, pp. 151-174.

S.S. ROSENTHAL, W. STRANGE (2001), The determinants of agglomeration, “Journal of Urban Economics”, 50, pp. 91-229.

L.F. SIGNORINI (ed.) (2000), Lo sviluppo locale. Un’indagine della Banca d’Italia sui distretti industriali, Roma, Donzelli.

F. SFORZI, C. WYMER, A. A. GILLARD (1997), I sistemi locali del lavoro nel 1991, in Istat, I sistemi locali del lavoro 1991, Argomenti n.10, Istat, Roma.

DOI: 10.6092/issn.1973-2201/3514