International Research Seminar "General equilibrium and optimality in monopolistic competition theory". Presentation by John Morrow.
On December 25, 2012, at 16:00 MSSE was held a public research seminar. Report on the theme "Productivity As If Space Mattered: An Application to Factor Markets Across China" by John Morrow (London School of Economics).
On December 25, 2012, 16:00-18:00.
Public research seminar.
John Morrow (London School of Economics). "Productivity As If Space Mattered: An Application to Factor Markets Across China".
Optimal production decisions depend on local market characteristics. In particular, labor demand is contingent on local wages and availability of skills. This paper develops a model to explain firm input demand across regions. Firms locate across regions with distinct labor markets and produce using imperfectly substitutable worker types. Estimating structural model parameters is simple and relies on a two stage OLS procedure. The first stage estimates local market conditions using firm employment and regional data, while the second incorporates regional costs into production function estimation. The method is applied to Chinese manufacturing, population census and geographic data to estimate local market costs and production technologies. Accounting for regional factor markets yields three main findings. First, labor markets which provide cost advantages explain substantial differences in firm productivity. Second, regions which have lower optimal hiring costs attract more firms per capita. Third, firm survival is twice as responsive to TFP once local markets are accounted for.
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Venue: 47, pr. Rimskogo-Korsakova, St. Petersburg (building of the bank "Saint Petersburg", conference-hall).