Date of Award

Spring 5-8-2020

Level of Access

Open-Access Thesis

Degree Name

Master of Science (MS)

Department

Economics

Advisor

Todd Gabe

Second Committee Member

Jonathan Rubin

Third Committee Member

Megan Bailey

Abstract

Regional agglomeration, or the concentration of firms within a given locality, has been found to offer advantages, such as cost reductions, knowledge spillovers, and labor pooling, to firms and individuals who locate there (Malmberg & Maskell, 2002). Regional agglomeration is captured in two ways: localization economies and urbanization economies, where the former emphasizes the benefits of clustering of specific industries within a given geography while the latter a more general benefit of locating in regions with a high level of industrial activity (Bosma et al., 2008). This thesis dedicates a chapter to exploring each of these measures of agglomeration. Chapter one of this thesis explores the caveats associated with measuring the impact of localization, also referred to as industrial clustering, in small rural places. Rural economies, due to the nature of their low urbanization level, are limited in the scope of their economic activities. In rural places, some economic policies encourage supporting industrial clusters in the region over other industries as a means of promoting economic growth. However, the precision of measures used to capture industrial localization, such as the location quotient (LQ), is dependent on the level of spatial and industrial aggregation. This chapter explores the extent to which industrial localization can be captured in small rural places (i.e. places with a high level of spatial aggregation) using an LQ and introduces a method of testing for LQ volatility. Through a model of new firm startups in Maine, the implications of including small places with volatile LQs are revealed. Including small places where the LQs are volatile and therefore may not accurately capture industrial localization in that region conceals the effect of localization on these small rural places. Chapter two of this thesis examines the benefits of urbanization on labor market job matching. The thick labor market fostered by urbanization economies can benefit workers by increasing the proximity of employment opportunities within their skillset (Duranton & Puga, 2003). Previous empirical studies have examined a link between urbanization and labor market matching, but primarily focused on larger metropolitan areas (Abel & Deitz, 2015; Büchel & Battu, 2003; Büchel & van Ham, 2003). This chapter expands upon the previous work conducted in the literature through an analysis of degree-level job matching of University of Maine alumni. Data from a 2020 survey of University of Maine alumni is used to gain an understanding of the employment prospects and location patterns of graduates. This analysis seeks to understand how regional characteristics, such as urbanization and localization, impact the likelihood of job match for UMaine graduates. The implications of job matching are evaluated through a Mincerian wage equation, where the wage premium of urbanization and job-matching is evaluated. The results show that the size of place, as measured by population in a locality, has a significant impact on job matching. This level of impact varies by industry and occupation. Furthermore, size of place has a large and significant impact on the wages of college graduates.

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