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Agglomeration and fair wages

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  • Peter Egger
  • Tobias Seidel

Abstract

This paper implements a fair wage constraint into an analytically tractable core-periphery agglomeration model. This enables us to study the role of imperfect labour markets for the pattern of agglomeration. In the short run, a marginal increase in fair wage preferences leads to an unambiguous compression of the national factor price differential between skilled and unskilled labour, involving an increase in the unemployment rate of unskilled workers. In the long run, this mechanism renders full dispersion of an unstable equilibrium already at higher trade costs than in perfect labour markets. There is a tendency for fair wage preferences to enforce agglomeration.

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Bibliographic Info

Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 41 (2008)
Issue (Month): 1 (February)
Pages: 271-291

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Handle: RePEc:cje:issued:v:41:y:2008:i:1:p:271-291

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Cited by:
  1. Xi Yang, 2014. "Labor market frictions, agglomeration, and regional unemployment disparities," The Annals of Regional Science, Springer, vol. 52(2), pages 489-512, March.
  2. Maximilian Von Ehrlich & Tobias Seidel, 2012. "More Similar Firms - More Similar Regions? On the Role of Firm Heterogeneity for Agglomeration," CESifo Working Paper Series 4028, CESifo Group Munich.
  3. Ulrich Zierahn, 2011. "Agglomeration, Congestion, and Regional Unemployment Disparities," ERSA conference papers ersa11p303, European Regional Science Association.
  4. Zierahn, Ulrich, 2012. "Monocentric cities, endogenous agglomeration, and unemployment disparities," HWWI Research Papers 130, Hamburg Institute of International Economics (HWWI).
  5. G. Rayp & B. Vanbergen, 2009. "Are social welfare states facing a race to the bottom? A theoretical perspective," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/572, Ghent University, Faculty of Economics and Business Administration.
  6. Zierahn, Ulrich, 2011. "Regional unemployment and new economic geography," HWWI Research Papers 105, Hamburg Institute of International Economics (HWWI).
  7. B. Merlevede & G. Rayp & S. Van Parys & T. Verbeke, 2011. "Do EU15 countries compete over labour taxes?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/750, Ghent University, Faculty of Economics and Business Administration.

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