| Summary: | The paper analyses the role of knowledge externalities in firms' employment and workers' wages. We test whether agglomeration economies and regional knowledge base exert a greater impact on wage growth than on employment growth, using spatial panel econometric techniques to control for unobserved spatial effects. Using a spatial panel for six Portuguese manufacturing industries, we found that regional knowledge spillovers, contrary to the theoretical assumptions, have a greater impact on employment in firms than on workers' wages. This analysis might enhance important policy debates about the effects of regional policies on employment and wages.
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