This chapter examines the link between firm productivity and the population composition of the areas in which firms operate. We combine annual firm-level microdata with area-level workforce characteristics obtained from population censuses.
Overall, the results confirm the existence of agglomeration effects that operate through local labour markets. We find evidence of productive spillovers from operating in areas with high-skilled workers, and with high population density. The strength and nature of spillovers varies across different types of firms.
Our findings demonstrate the importance of controlling for multiple dimensions of local workforce composition, and of analysing effects for sub-populations of firms.