Is the division of labour limited by the extent of the market? Evidence from French cities

This paper provides supportive evidence to the notion that the division of labour is limited by the extent of the (local) market. We first propose a theoretical model. Its main prediction is that scarce specialists occupations are over-represented in large cities. Using census data for French cities, we find strong empirical support for this prediction.

Research highlights
► Provides a novel way to model urban agglomeration benefits which relies on small indivisibilities and the division of labour.
► Proposes supportive evidence for the key prediction of the model about the relative over-representation of scarce occupations in large cities.
► Proposes a large number of robustness tests showing the results are not driven by the way we aggregate the data, by the way we define specialisation, our geographical zoning, particular sectors, ability sorting, or learning.