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Specialized consumer services cause agglomeration - A theoretical model and some implications for regional policy

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Michael Roos

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Abstract

This paper presents a regional economic model in which increasing returns to scale in the production of non-traded consumer services cause the agglomeration of high-skilled workers in one region. The residential choice of high-skilled individuals exerts a pecuniary externality on immobile low-skilled individuals. Therefore, the low-skilled in the periphery reach a lower utility level than those in the core. We analyze minimum wages, training, and redistributive taxation as policy instruments to promote the low-skilled in the periphery. Even if they affect one region only, all these instruments alter the interregional equilibrium and have complexly interacting effects.

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Paper provided by University of Dortmund, Department of Economics in its series Discussion Papers in Economics with number 00_10.

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Length: 28 pages
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Handle: RePEc:mik:wpaper:00_10

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This page was last updated on 2009-12-2.

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