Trade, Urban Systems, and Labor Markets
AbstractThis paper investigates the impacts of free trade on the structure of urban systems, skill distribution, and income disparities. The paper proposes a model that integrates international trade theory and the theory of urban system. This is done in a two sector, spatial general equilibrium model of a North-South trade. Each country is populated with a continuum of unskilled workers with heterogeneous potential ability. Through differential training costs, workers with different potential ability can achieve the same productivity. Workers can acquire a skill by investing in training. Thus, skill distribution in both countries is determined endogenously in the model through self-selection. The economy produces a final good with the use of a high-tech intermediate input and unskilled workers. Horizontally differentiated skilled workers produce the high-tech intermediate input. Cities are formed in this model as a result of investment in setup cost, i.e., public infrastructures. I characterize two different types of spatial equilibria: a closed-economy equilibrium, in which each country consists of a system of cities without trade, and a free-trade equilibrium, in which we allow for trade between cities and countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of New Orleans, Department of Economics and Finance in its series Working Papers with number 2005-13.
Length: 28 pages
Date of creation: Nov 2005
Date of revision:
Potential ability; Training; Cities;
Find related papers by JEL classification:
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-05-06 (All new papers)
- NEP-GEO-2006-05-06 (Economic Geography)
- NEP-INT-2006-05-06 (International Trade)
- NEP-URE-2006-05-06 (Urban & Real Estate Economics)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Janet Murphy Crane).
If references are entirely missing, you can add them using this form.