Spatial skill concentration agglomeration economies

Abstract

Abstract Using the Brazilian census and administrative panel data, the present paper provides evidence that the spatial concentration of analytical skills generates positive wage externalities for all workers in the local labor market. We rely on shift‐share instrumental variables to overcome the endogeneity of skill concentrations. The observed externality is independent from the classical market size economies. The estimates are robust to geography, institutions and workers' sorting on unobservable abilities.