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Labor differentiation and agglomeration in general equilibrium

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  • Berliant, Marcus
  • Zenou, Yves

Abstract

The aim of this paper is to explore the structure of cities as a function of labor differentiation, gains to trade, a fixed cost for constructing the transportation network, a variable cost of commodity transport, and the commuting costs of consumers. Firms use different types of labor to produce different outputs. Locations of all agents are endogenous as are prices and quantities. This is among the first papers to apply smooth economy techniques to urban economics. Existence of equilibrium and its determinacy properties depend crucially on the relative numbers of outputs, types of labor and firms. More differentiated labor implies more equilibria. We provide tight lower bounds on labor differentiation for existence of equilibrium. If these sufficient conditions are satisfied, then generically there is a continuum of equilibria for given parameter values. Finally, an equilibrium allocation is not necessarily Pareto optimal in this model.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36207.

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Date of creation: 26 Jan 2012
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Handle: RePEc:pra:mprapa:36207

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Keywords: city structure; heterogeneous labor; transportation network; general equilibrium;

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  1. Abdel-Rahman, H. M., 1988. "Product differentiation, monopolistic competition and city size," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 69-86, February.
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  6. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in Regional Migration Dynamics," MPRA Paper 13053, University Library of Munich, Germany.
  8. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 509-27, June.
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  27. Berliant, Marcus & Kung, Fan-chin, 2006. "The indeterminacy of equilibrium city formation under monopolistic competition and increasing returns," Journal of Economic Theory, Elsevier, vol. 131(1), pages 101-133, November.
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Citations

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Cited by:
  1. David E. Wildasin, 2000. "Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition," American Economic Review, American Economic Association, vol. 90(1), pages 73-95, March.
  2. Marcus Berliant & Fan- chin Kung, 2004. "The Indeterminacy of Equilibrium City Formation under Monopolistic Competition and Increasing Returns," Urban/Regional, EconWPA 0407011, EconWPA, revised 29 Apr 2005.
  3. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in regional migration dynamics," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 714-720, November.
  4. Fan-chin Kung, 2004. "Genericity analysis of split bifurcations," GE, Growth, Math methods, EconWPA 0410008, EconWPA, revised 13 Oct 2004.

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