Firm-Worker Matching in Industrial Clusters

In this paper we use a novel approach and a large Portuguese employer-employee paneldata set to study the hypothesis that industrial agglomeration improves the quality of the firmworkermatching process. Our method makes use of recent developments in the estimationand analysis of models with high-dimensional fixed effects. Using wage regressions withcontrols for multiple sources of observed and unobserved heterogeneity we find littleevidence that the quality of matching increases with firm’s clustering within the sameindustry. This result supports Freedman’s (2008) analysis using U.S. data....