The role of labour markets in urban-rural differences in economic development

Lead Research Organisation: London School of Economics & Pol Sci
Department Name: Economics


The project will study the role of labour markets in regional inequality in the UK, especially the falling behind of economic development in rural areas as compared to most urban areas. In one indication of this growing divergence, a good predictor of whether an electoral ward voted in majority for Brexit was whether the area was mainly rural. While other factors undoubtedly also played a role, this is a strong indicator that people in rural areas have the perception that they are not benefit from globalisation. A similar pattern was observed in the election of Donald Trump as president of the United States. Fears are mainly around job security and income, two factors that are influenced by how local labour markets adapt to change and interact with labour markets in other areas.


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Studentship Projects

Project Reference Relationship Related To Start End Student Name
ES/P000622/1 01/10/2017 30/09/2027
1953948 Studentship ES/P000622/1 19/10/2017 30/03/2021 Carolin Ioramashvili
Description My research concerns regional income inequality in the UK. Closing the big gaps in average incomes across the regions of the UK was an important objective of the May government and has once again been confirmed by the Johnson government, especially in light of the social-economic disparities that go along with disparities in income. I am working on two different projects tackling this general theme, and developing a third one. In the first project I asked, what happens to local economies as people move in and out due to internal migration. Internal migration is important, as it adds or diminishes to the skill base of a local economy, as well as agglomeration economies (people tend to be more productive when they are surrounded by a larger number of people, to put it simply). I found that there is a positive effect on local workers if more workers from elsewhere in the UK move into their area. However, the opposite was not true: there was no effect on the earnings of people who stay in a place as other workers leave the area.

The second project concerns the division of total output between labour and capital, i.e. workers and business owners and shareholders. This is an important question, because wealth is more unequally distributed than income, so when the share of total output going to the owners of capital increases, this is shared between a smaller number of people (who are already wealthy) than when the share of output going to workers increases. In the UK, as in other countries around the world, the labour share has been falling in recent years. This can be connected to growing industry concentration: firms that are dominant in their industry are able to charge higher prices, but they do not necessarily pay their workers more. These dominant firms are predominantly located in London as well as other urban areas. I estimate that the labour share would be around 1 percentage point higher in 2014, had industry concentration not increased since 2002, with a larger difference in urban than in predominantly rural areas.

The third project I am developing concerns the location of innovative businesses. We know that innovation creates high returns to the innovators, as well as spillover effects for the local economy. The goal of this project is to study how the location of innovative businesses and industries contributes to regional inequality in the UK.
Exploitation Route I hope that I can firm up the results strong enough to be able to make concrete policy recommendations. Regional inequality is among the top policy concerns, with the "levelling up" agenda receiving a lot of attention.
Sectors Communities and Social Services/Policy,Government, Democracy and Justice

Description UCLA visit 
Organisation University of California, Los Angeles (UCLA)
Country United States 
Sector Academic/University 
PI Contribution I am spending three months at the Luskin School of Public Policy as a visiting graduate researcher. I am using this opportunity to share my research findings, with a seminar planned for later this months, networking, and attending other conferences in the US. The visit is funded by an LSE Doctoral Training Center grant.
Collaborator Contribution I am hosted by Professor Michael Storper, who is also organising a half-day seminar where I will be able to present. I am provided with desk space, giving me the opportunity to interact with other PhD students and staff.
Impact Seminar presentation
Start Year 2020