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Labor Differentiation and Agglomeration in General Equilibrium

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Author Info
Marcus Berliant (Washington University in St. Louis)
Yves Zenou (University of Southampton)

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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. To our knowledege, this is the first paper that applies 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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Paper provided by EconWPA in its series Urban/Regional with number 0408003.

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Length: 50 pages
Date of creation: 10 Aug 2004
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Handle: RePEc:wpa:wuwpur:0408003

Note: Type of Document - pdf; pages: 50
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Related research
Keywords: city structure; heterogeneous labor; transportation network; general equilibrium;

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Find related papers by JEL classification:
D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
R14 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Land Use Patterns

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References listed on IDEAS
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. Berliant, M. & Fujita, M., 1990. "Alonso'S Discrete Population Model Of Land Use: Efficient Allocations And Competitive Equilibria," RCER Working Papers 217, University of Rochester - Center for Economic Research (RCER).
    Other versions:
  2. Anderson, Simon P & Engers, Maxim, 1994. "Spatial Competition with Price-Taking Firms," Economica, London School of Economics and Political Science, vol. 61(242), pages 125-36, May. [Downloadable!] (restricted)
  3. Wang, Ping, 1990. "Competitive equilibrium formation of marketplaces with heterogeneous consumers," Regional Science and Urban Economics, Elsevier, vol. 20(3), pages 295-304, November. [Downloadable!] (restricted)
  4. Tjalling C. Koopmans & Martin J. Beckmann, 1955. "Assignment Problems and the Location of Economic Activities," Cowles Foundation Discussion Papers 4, Cowles Foundation, Yale University. [Downloadable!]
  5. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June. [Downloadable!] (restricted)
  6. Berliant, Marcus & Wang, Ping, 1993. "Endogenous formation of a city without agglomerative externalities or market imperfections : Marketplaces in a regional economy," Regional Science and Urban Economics, Elsevier, vol. 23(1), pages 121-144, March. [Downloadable!] (restricted)
  7. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Marcus Berliant & Hideo Konishi, 2000. "The Endogenous Formation of a City: Population Agglomeration and Marketplaces in a Location-Specific Production Economy," Boston College Working Papers in Economics 451, Boston College Department of Economics. [Downloadable!]
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  9. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January. [Downloadable!] (restricted)
  10. Fujita, Masahisa & Krugman, Paul, 1995. "When is the economy monocentric?: von Thunen and Chamberlin unified," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 505-528, August. [Downloadable!] (restricted)
  11. Hamilton, Jonathan H & MacLeod, W Bentley & Thisse, Jacques-Francois, 1991. "Spatial Competition and the Core," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 925-37, August. [Downloadable!] (restricted)
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  12. Kim, Sunwoong, 1991. "Heterogeneity of labor markets and city size in an open spatial economy," Regional Science and Urban Economics, Elsevier, vol. 21(1), pages 109-126, May. [Downloadable!] (restricted)
  13. Berliant, Marcus & ten Raa, Thijs, 1994. "Regional science: The state of the art," Regional Science and Urban Economics, Elsevier, vol. 24(5), pages 631-647, October. [Downloadable!] (restricted)
  14. Fujita, Masahisa & Thisse, Jacques-Francois, 1986. "Spatial Competition with a Land Market: Hotelling and Von Thunen Unified," Review of Economic Studies, Blackwell Publishing, vol. 53(5), pages 819-41, October. [Downloadable!] (restricted)
  15. Paul R. Krugman, 1991. "First Nature, Second Nature, and Metropolitan Location," NBER Working Papers 3740, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Ellickson, Bryan, 1979. "Competitive equilibrium with local public goods," Journal of Economic Theory, Elsevier, vol. 21(1), pages 46-61, August. [Downloadable!] (restricted)
  17. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June. [Downloadable!] (restricted)
  18. Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  19. Schweizer, Urs & Varaiya, Pravin & Hartwick, John, 1976. "General equilibrium and location theory," Journal of Urban Economics, Elsevier, vol. 3(3), pages 285-303, July. [Downloadable!] (restricted)
  20. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April. [Downloadable!] (restricted)
  21. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476.
  22. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June. [Downloadable!] (restricted)
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  23. Papageorgiou, Yorgo Y & Smith, Terrence R, 1983. "Agglomeration as Local Instability of Spatially Uniform Steady-States," Econometrica, Econometric Society, vol. 51(4), pages 1109-19, July. [Downloadable!] (restricted)
  24. Grimaud, A. & Laffont, J. J., 1989. "Existence of a spatial equilibrium," Journal of Urban Economics, Elsevier, vol. 25(2), pages 213-218, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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. 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. [Downloadable!] (restricted)
  2. Marcus Berliant & Fan- chin Kung, 2004. "The Indeterminacy of Equilibrium City Formation under Monopolistic Competition and Increasing Returns," Urban/Regional 0407011, EconWPA, revised 29 Apr 2005. [Downloadable!]
    Other versions:
  3. Fan-chin Kung, 2004. "Genericity analysis of split bifurcations," GE, Growth, Math methods 0410008, EconWPA, revised 13 Oct 2004. [Downloadable!]
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