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Agglomeration with the pros and cons of labor heterogeneity

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  • Ryusuke Ihara

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    Abstract

    Using a simple two-region model with the positive and negative effects of labor heterogeneity, we investigate the agglomeration pattern of entrepreneurs and the commuting pattern of heterogeneous workers. Labor heterogeneity is a source of productivity for e.g. high-tech industries as well as is an obstacle to e.g. mass production. As a result, we show that entrepreneurs tend to concentrate to a region hence regional labor markets are united with interregional commuting when (i) the commuting cost or (ii) the adjustment cost of labor heterogeneity is low, and when (iii) the input of heterogeneous labor is large. These results explain: the progress of urbanization with the decrease in commuting costs; the difference in the agglomeration tendency of industries.

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    Bibliographic Info

    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p528.

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    Date of creation: Sep 2011
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    Handle: RePEc:wiw:wiwrsa:ersa11p528

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    1. Marcus Berliant & Masahisa Fujita, 2005. "Knowledge Creation as a Square Dance on the Hilbert Cube," Game Theory and Information, EconWPA 0506006, EconWPA, revised 26 Sep 2005.
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    6. 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.
    7. Ottaviano, Gianmarco Ireo Paolo & Prarolo, Giovanni, 2009. "Cultural Identity and Knowledge Creation in Cosmopolitan Cities," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7432, C.E.P.R. Discussion Papers.
    8. BEHRENS, Kristian & SATO, Yasuhiro, 2006. "Labor market integration and migration: impacts on skill formation and the wage structure," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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