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Competition and Human Capital Accumulation: A Theory of Interregional Specialization and Trade

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  • Julio J. Rotemberg
  • Garth Saloner

Abstract

We consider a model with several regions whose technological ability and factor endowments are identical and in which transport costs between regions are non-negligible. Nonetheless, certain goods are sometimes produced by multiple firms all of which are located in the same region. These goods are then exported from the regions in which their production is agglomerated. Regional agglomeration of production and trade stem from two forces. First, competition between firms for the services of trained workers is necessary for the workers to recoup the cost of acquiring industry-specific human capital. Second, the technology of production is more efficient when plants are larger than a minimum efficient scale and local demand is insufficient to support several firms of that scale. We also study the policy implications of our model.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3228.

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Date of creation: Jan 1990
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Publication status: published as Rotemberg, Julio J. and Garth Saloner. "Competition And Human Capital Accumulation: A Theory Of Interregional Specialization And Trade," Regional Science and Urban Economics, 2000, v30(4,Jul), 373-404.
Handle: RePEc:nbr:nberwo:3228

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  1. James R. Markusen & Arthur J. Robson, 1980. "Simple General Equilibrium and Trade with a Monopsonized Sector," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 13(4), pages 668-82, November.
  2. Lapan, Harvey E., 1988. "The Optimal Tariff, Production Lags and Time Consistency," Staff General Research Papers, Iowa State University, Department of Economics 10816, Iowa State University, Department of Economics.
  3. McCulloch, Rachel & Yellen, Janet L., 1980. "Factor market monopsony and the allocation of resources," Journal of International Economics, Elsevier, Elsevier, vol. 10(2), pages 237-247, May.
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  5. Feenstra, Robert C., 1980. "Monopsony distortions in an open economy: A theoretical analysis," Journal of International Economics, Elsevier, Elsevier, vol. 10(2), pages 213-235, May.
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  7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(3), pages 483-99, June.
  8. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
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  10. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring.
  11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
  12. Dudey, Marc, 1990. "Competition by Choice: The Effect of Consumer Search on Firm Location Decisions," American Economic Review, American Economic Association, American Economic Association, vol. 80(5), pages 1092-1104, December.
  13. James R. Markusen & James R. Melvin, 1981. "Trade, Factor Prices, and the Gains from Trade with Increasing Returns to Scale," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 14(3), pages 450-69, August.
  14. James R. Melvin, 1969. "Increasing Returns to Scale as a Determinant of Trade," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 2(3), pages 389-402, August.
  15. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(113), pages 1-12, January.
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