Marshallian labour market pooling: Evidence from Italy

• The relationship between agglomeration and labour market in Italy is investigated.
• Unique data sources provide information on turnover, learning, matching and hold up.
• Both worker and firm perspectives, across a range of industries, are considered.
• Denser labour markets show higher turnover, on-the-job learning and better job matches.
• Labour market pooling gains account for a small share of the agglomeration economies.

This paper employs a unique Italian data source to take a comprehensive approach to labour market pooling. It jointly considers many different aspects of the agglomeration — labour market relationship, including turnover, learning, matching, and hold up. It also considers labour market pooling from the perspective of both workers and firms and across a range of industries. Overall, the paper finds some support for theories of labour market pooling, but the support is weak. Specifically, there is a general positive relationship of turnover to local population density, which is consistent with theories of agglomeration and uncertainty. There is also evidence of on-the-job learning that is consistent with theories of labour pooling, labour poaching, and hold up. In addition, the paper provides evidence consistent with agglomeration improving job matches. However, the labour market pooling gains that we measure are small in magnitude and seem unlikely to account for a substantial share of the agglomeration benefits accruing to Italian workers and firms.