Rainald Borck () (University of Munich and DIW Berlin) Michael Pflüger () (University of Passau, DIW Berlin and IZA) Matthias Wrede () (RWTH Aachen University and CESifo)
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This paper provides a simple theory of geographical mobility which simultaneously explains people’s choice of residences in space and the location of industry. Residences are chosen on the basis of the utility which mobile households obtain across locations. The spatial pattern of industry is determined by the location decision of a scarce essential factor of production which seeks to obtain the highest possible economic return. Our theory comprehends applications to commuting and physical capital mobility. Referring to the decline in mobility costs, we are able to explain that long-distance commuting and foreign direct investment have increased and that industrial activity has become more concentrated both within as well as across countries.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
2862.
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements F22 - International Economics - - International Factor Movements and International Business - - - International Migration R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography) R23 - Urban, Rural, and Regional Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
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