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Elastic labor supply and agglomeration

Author

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  • Takanori Ago
  • Tadashi Morita
  • Takatoshi Tabuchi
  • Kazuhiro Yamamoto

Abstract

This study analyzes the interplay between the agglomeration of economic activities and interregional differences in working hours, which are typically longer in large cities, as they are normally more developed than small cities. For this purpose, we develop a two†region model with endogenous labor supply. Although we assume a symmetric distribution of immobile workers, the symmetric equilibrium breaks in the sense that firms may agglomerate when trade costs are intermediate and labor supply is elastic. We also show that the price index is always lower, while labor supply, per capita income, real wages, and welfare are always higher in the more agglomerated region.

Suggested Citation

  • Takanori Ago & Tadashi Morita & Takatoshi Tabuchi & Kazuhiro Yamamoto, 2018. "Elastic labor supply and agglomeration," Journal of Regional Science, Wiley Blackwell, vol. 58(2), pages 350-362, March.
    • Handle: RePEc:bla:jregsc:v:58:y:2018:i:2:p:350-362
    DOI: 10.1111/jors.12361
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    Cited by:

    1. Juan Carlos Lopez & Tadashi Morita, 2024. "Public good provision and progressive income taxation in a spatial economy," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 73(3), pages 979-1003, October.
    2. Xinmeng Li & Dao-Zhi Zeng, 2022. "Frictional unemployment, bargaining, and agglomeration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 68(1), pages 151-179, February.
    3. Xiuxiu Jiang & Xia Wang & Jia Ren & Zhimin Xie, 2023. "Digital economy, agglomeration, and entrepreneurship in Chinese cities," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(1), pages 359-370, January.
    4. Yoshihiro Hamaguchi, 2025. "Agglomeration, inequality, and the environment in an R&D-based growth model," Letters in Spatial and Resource Sciences, Springer, vol. 18(1), pages 1-17, December.
    5. E. A. Kolomak & A. O. Nezavitina, 2021. "Assessment of the Spatial Externalities of Major Cities on the Housing Market of Small and Medium-Sized Cities," Regional Research of Russia, Springer, vol. 11(3), pages 308-314, July.

    More about this item

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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