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Labor Pooling, Labor Poaching and Spatial Clustering

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Author Info
Pierre-Philippe Combes
Gilles Duranton

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Abstract

When firms cluster in the same local labor market, they face a trade-off between the benefits of labor pooling (i.e., access to workers whose knowledge help reduce costs) and the costs of labor poaching (i.e., loss of some key workers to competition and the indirect effect of a higher wage bill to retain the others). We explore this trade-off in a duopoly game. Depending on market size and on the degree of horizontal differentiation between products, we characterize the strategic choices of firms regarding locations, wages, poaching and prices. Our results show that co-location, although it is always efficient, is not in general the equilibrium outcome.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0510.

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Date of creation: Sep 2001
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Handle: RePEc:cep:cepdps:dp0510

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Related research
Keywords: Labor pooling; labor poaching; firm clustering; agglomeration;

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Find related papers by JEL classification:
J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
R32 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Other Production and Pricing Analysis

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  3. OTTAVIANO, Gianmarco & THISSE, Jacques-Franois, 1999. "Monopolistic competition, multiproduct firms and optimum product diversity," CORE Discussion Papers 1999019, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
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  4. Duranton, Gilles & Puga, Diego, 1999. "Diversity and Specialization in Cities: Why, Where and When Does It Matter?," CEPR Discussion Papers 2256, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August. [Downloadable!] (restricted)
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  13. Jarle Møen, 2000. "Is Mobility of Technical Personnel a Source of R&D Spillovers?," NBER Working Papers 7834, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. J. Schuster, 1999. "Introduction," Journal of Cultural Economics, Springer, vol. 23(1), pages 1-2, March. [Downloadable!] (restricted)
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