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Integration, agglomeration and the political economics of factor mobility

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  • OTTAVIANO, Gianmarco
  • THISSE, Jacques-François

Abstract

This paper tackles the issue of the optimality of agglomeration in a two-region economy with skilled/mobile and unskilled/immobile workers. The market leads to the optimal outcome when transport costs are high or low. However, for intermediate values, it yields agglomeration whereas dispersion is socially desirable. We show that competitive lobbying on factor mobility by the two groups of workers sustains the second best optimum.

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File URL: http://dx.doi.org/10.1016/S0047-2727(00)00166-3
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -1541.

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Handle: RePEc:cor:louvrp:-1541

Note: In : Journal of Public Economics, 83, 429-456, 2002
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