This research project examines the causes and consequences of differences in local labour market outcomes in France and Germany. We systematically and comprehensively examine the roles of each side of the local labour market: the behaviour of firms seeking to harness the gains in productivity stemming from the close proximity of firms in urban centres; the location decision of workers who trade-off wages, employment probabilities, and housing costs; and the interaction of these economic forces that lead to a spatial equilibrium. We then open the black box of the firm, and investigate how these forces lead to particular organisation structures, and interact with trade openness of firms. This contributes to a better understanding of spatial multipliers and will enable us to answer a key public policy question: in view of the sometimes substantial disparities between localities in terms of unemployment rates and wage levels, what is an optimal policy response?