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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

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Abstract

We consider a model with several regions whose technological ability and factor endowments are identical and in which transport costs between regions are nonnegligible. 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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Handle: RePEc:nbr:nberwo:3228

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Joseph Farrell & Garth Saloner, 1985. "Standardization, Compatibility, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 70-83, Spring. [Downloadable!] (restricted)
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  2. Venables, Anthony J, 1987. "Trade and Trade Policy with Differentiated Products: A Chamberlinian-Ricardian Model," Economic Journal, Royal Economic Society, vol. 97(387), pages 700-717, September. [Downloadable!] (restricted)
  3. Feenstra, Robert C., 1980. "Monopsony distortions in an open economy: A theoretical analysis," Journal of International Economics, Elsevier, vol. 10(2), pages 213-235, May. [Downloadable!] (restricted)
  4. James R. Markusen & Arthur J. Robson, 1980. "Simple General Equilibrium and Trade with a Monopsonized Sector," Canadian Journal of Economics, Canadian Economics Association, vol. 13(4), pages 668-82, November. [Downloadable!] (restricted)
  5. Lapan, Harvey E, 1988. "The Optimal Tariff, Production Lags, and Time Consistency," American Economic Review, American Economic Association, vol. 78(3), pages 395-401, June.
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  6. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Blackwell Publishing, vol. 38(113), pages 1-12, January. [Downloadable!] (restricted)
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