Much is known about how the local economic structure shapes employment growth. Especially industrial clusters and other forms of the sectoral composition are well-examined. In contrast, the skill dimension of employment growth is often reduced to human capital indicators either on the left or the right hand side of the regression formula. Meanwhile, employment prospects of mid and unskilled workers are of less interest to the literature but in face of high long-term unemployment surely increasingly attractive to labour market politicians. Furthermore, analyses of (high-skilled) employment growth neglects regional policy in peripheral regions with lacking urban wage premia or (under)supply of amenities.
The paper by Duranton & Puga (2005), however, proposes a promising approach to model employment of different skills in regions of different density. They augment the notion of regional specialisation by the function a region exhibits in the production process. On the one hand, their paper adds to the traditional literature working with intra and inter industry externalities, i. e. localisation effects (Marshall externalities) and urbanisation effects (Jacobs externalities), respectively. On the other hand, they emphasise the comparative cost advantage of less abundant regions.
We take functional specialisation as a theoretical starting point to assess the components of qualification-specific employment growth and add further theoretical considerations in order to under stand when and why skill levels develop differently at the local level. Our empirical model employs a regression analogue of the shift-share technique (Patterson, 1991; Möller & Tassinopoulos, 2000; Südekum & Blien, 2004). In addition, we use a more differentiated measure of five occupational skill classes (Cordes, 2007) than the imprecise 3-level indicator of vocational education. The empirical analysis then finds evidence for skill specialisation on the one hand as well as for complementarities between occupational qualification levels on the other hand.
The paper is structured as follows. Section 2 reviews the relevant literature; section 3 explains the data and motivates our further analysis by means of descriptive statistics. Section 4 describes the empirical model. In section 5, the results of the shift-share regressions of qualification-specific employment growth are presented and section 6 concludes.
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What drives Skill-Biased Regional Employment Growth in West Germany?
