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Birth of Cities: Division of Labor and Transportation Costs

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  • tadashi morita
  • kazuhiro yamamoto

Abstract

In this paper, we constructs a model with two-region, two sector and two types of workers. One type of workers has a comparative advantage in agricultural production and mobile between two regions, while the other type of workers has a comparative advantage in producing manufactured goods and immobile between regions. We assume that intra-regional (inter-regional) trade incurs transaction (transportation) costs. This paper shows that when the productivity of workers is low relative to the intra-regional transaction costs, division of labor is not performed and the market does not exist. In this economy, both workers are self-sufficient. When the productivity of workers becomes medium level, division of labor is progressed in a region where both types of workers exist, and the market is formed. The number of people living in this region increases and this region becomes the city. When the productivity of workers becomes high, inter-regional trade starts and the division of labor is also progressed in the other region.

Suggested Citation

  • tadashi morita & kazuhiro yamamoto, 2014. "Birth of Cities: Division of Labor and Transportation Costs," ERSA conference papers ersa14p985, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa14p985
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    File URL: https://www-sre.wu.ac.at/ersa/ersaconfs/ersa14/e140826aFinal00985.pdf
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    References listed on IDEAS

    as
    1. Donald R. Davis & Jonathan I. Dingel, 2019. "A Spatial Knowledge Economy," American Economic Review, American Economic Association, vol. 109(1), pages 153-170, January.
    2. Kristian Behrens & Gilles Duranton & Frédéric Robert-Nicoud, 2014. "Productive Cities: Sorting, Selection, and Agglomeration," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 507-553.
    3. Starrett, David, 1978. "Market allocations of location choice in a model with free mobility," Journal of Economic Theory, Elsevier, vol. 17(1), pages 21-37, February.
    4. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411, January.
    5. Pines,David & Sadka,Efraim & Zilcha,Itzhak (ed.), 1998. "Topics in Public Economics," Cambridge Books, Cambridge University Press, number 9780521561365.
    6. Kanemoto, Yoshitsugu, 1980. "Theories of urban externalities," MPRA Paper 24614, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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