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Industrial Specialization and the Returns to Labor

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Author Info
Diamond, Charles A
Simon, Curtis J

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Abstract

Comparative advantage and the division of labor make geographic concentration of production within a nation profitable and cause many cities to be specialized in one or a few main industries. Specialized cities, however, suffer greater unemployment risk. The theory of compensating wage differentials predicts that individuals living in more specialized cities will be compensated in the form of higher wage rates. The authors study the effects of specialization on wages and unemployment in the United States. They find evidence of compensating wage differentials. That firms choose to locate in more specialized, higher-wage cities is indirect evidence of the gains to specialization. Copyright 1990 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 8 (1990)
Issue (Month): 2 (April)
Pages: 175-201
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Handle: RePEc:ucp:jlabec:v:8:y:1990:i:2:p:175-201

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  10. Pieter J.H. van Beukering & Jeroen C.J.M. van den Bergh & Marco A. Janssen & Harmen Verbruggen, 2000. "International Material-Product Chains: An Alternative Perspective on International Trade and Trade Theories," Tinbergen Institute Discussion Papers 00-034/3, Tinbergen Institute. [Downloadable!]
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  14. Sabrina Di Addario & Guido De Blasio, 2002. "Labor Market Pooling," IMF Working Papers 02/121, International Monetary Fund. [Downloadable!]
  15. Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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