Acquisition of Skills, Education Subsidies, and Agglomeration of Firms

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Acquisition of Skills, Education Subsidies, and Agglomeration of Firms

Author Info

Toulemonde, Eric () (University of Lausanne and IZA Bonn)

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Eric Toulemonde

Abstract

An analytically solvable model of new economic geography is developed. Acquisition of skills is costly for workers but it allows them to earn wages that are larger than those of the unskilled. Moreover, skills acquisition can be subsidized by a regional government. For large transport costs, firms spread more or less evenly between regions, their precise location being determined by the level of education subsidies. For low transport costs, firms agglomerate in one region. We also identify equilibria with partial agglomeration of firms. Finally, we show that the incentives to subsidy education largely depend on the level of transport costs.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 939.

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Length: 30 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:iza:izadps:dp939

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F15 - International Economics - - Trade - - - Economic Integration
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

This paper has been announced in the following NEP Reports:

NEP-ALL-2003-12-14 (All new papers)
NEP-COM-2003-12-14 (Industrial Competition)
NEP-GEO-2003-12-14 (Economic Geography)
NEP-LAB-2003-12-14 (Labour Economics)

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This page was last updated on 2009-12-14.

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