Main fields: Empirical Microeconomics
Secondary fields: Urban and Regional Economics, Real Estate Economics
Firm-Level Fluctuations and the Density of Economic Activity
Abstract: This paper empirically investigates the role of the density of economic activity on firm-level sales and employment growth fluctuations using Hungarian balance sheet data of manufacturing firms over the period of 2000-2008. We estimate a significantly negative elasticity of firm sales and employment volatility with respect to local economic density employing firm fixed effects and instrumental variables techniques. More stable sales and employment growth in denser areas can be explained by the proximity of potential local input providers and having access to a deeper labor market pool.