Rural Labour Markets: Local Multipliers and Agglomeration Spillovers

Twenty-five percent of the population in developed countries, lives in rural areas.
However, social scientists have largely focused on cities in recent decades. As a result, there
is a limited literature on rural areas. Although recent research documents large differences in
employment growth across rural areas, the drivers of labour market dynamics in these areas
are still unclear. My research proposal aims to study local multipliers and agglomeration
spillovers in rural labour markets, using data for Italy. Local multipliers can be defined as the
additional economic benefit that accrue to the local economy in the presence of a particular
type of economic activity. For example, if a new job is created in an area, the local economy
benefits from an increase in both the spending of the firm and the spending of workers. As a
result, the multiplier effect leads to other local industries to benefit as well. Agglomeration
spillovers are defined as the benefits that come when firms and people locate near one
another together in a given geographic area. In the presence of agglomeration spillovers,
rural areas can share intermediate input producer and labour pool, with a resulting decrease
in cost of productions and relocation costs. Also, thanks to shared knowledge and improved
skills matching, firms experience higher innovation with lower costs and higher profits
(O'Sullivan, 9th Edition). In the first strand of my research, I will study local multiplier effects
in rural labour market exploiting demand shocks for the manufacturing of food and beverage
industry. In the second strand, I will study agglomeration spillovers. My research design
exploits shocks to SMEs and artisanal workshops. I will use an inverse process compared to
the literature, that tends to exploit firm entry. I will investigate the local labour market effect
of firm destruction to explore the extent to which de-agglomeration spillovers affect the
labour market and lead to decrease in productivity and increase in costs at local level. The
findings will inform governments and policy makers about drivers of labour market dynamics
in peripheral areas and help to address an important gap in our knowledge.