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Agglomeration and fair wages

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  • Peter Egger
  • Tobias Seidel

Abstract

. This paper implements a fair wage constraint into an analytically tractable core‐periphery agglomeration model. This enables us to study the role of imperfect labour markets for the pattern of agglomeration. In the short run, a marginal increase in fair wage preferences leads to an unambiguous compression of the national factor price differential between skilled and unskilled labour, involving an increase in the unemployment rate of unskilled workers. In the long run, this mechanism renders full dispersion of an unstable equilibrium already at higher trade costs than in perfect labour markets. There is a tendency for fair wage preferences to enforce agglomeration. Ce mémoire impose une contrainte de juste salaire sur un modèle d'agglomération cœur‐périphérie analytiquement traitable. Voilà qui permet d'étudier le rǒle des marchés du travail imparfaits sur le pattern d'agglomération. A court terme, un accroissement marginal de la préférence pour un salaire juste entraǐne une compression nette du différentiel dans les prix des facteurs entre les travailleurs spécialisés et les autres, et un accroissement du taux de chǒmage des travailleurs non spécialisés. A long terme, la dispersion de la production devient un équilibre instable à des coǔts de transports plus élevés que ceux qui sont critiques dans le cas de marchés du travail parfaits. Les préférences pour des salaires justes ont tendance à déclencher un processus d'agglomération.

Suggested Citation

  • Peter Egger & Tobias Seidel, 2008. "Agglomeration and fair wages," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(1), pages 271-291, February.
    • Handle: RePEc:wly:canjec:v:41:y:2008:i:1:p:271-291
    DOI: 10.1111/j.1365-2966.2008.00463.x
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    Cited by:

    1. Zierahn, Ulrich, 2012. "Monocentric cities, endogenous agglomeration, and unemployment disparities," HWWI Research Papers 130, Hamburg Institute of International Economics (HWWI).
    2. Ulrich Zierahn, 2013. "Agglomeration, congestion, and regional unemployment disparities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(2), pages 435-457, October.
    3. von Ehrlich, Maximilian & Seidel, Tobias, 2015. "Regional implications of financial market development: Industry location and income inequality," European Economic Review, Elsevier, vol. 73(C), pages 85-102.
    4. Udo Kreickemeier, 2009. "Trade, technology, and unemployment: the role of endogenous skill formation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(2), pages 639-664, May.
    5. von Ehrlich, Maximilian & Seidel, Tobias, 2013. "More similar firms — More similar regions? On the role of firm heterogeneity for agglomeration," Regional Science and Urban Economics, Elsevier, vol. 43(3), pages 539-548.
    6. B. Merlevede & G. Rayp & S. Van Parys & T. Verbeke, 2011. "Do EU15 countries compete over labour taxes?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/750, Ghent University, Faculty of Economics and Business Administration.
    7. Zierahn, Ulrich, 2011. "Regional unemployment and new economic geography," HWWI Research Papers 105, Hamburg Institute of International Economics (HWWI).
    8. 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.
    9. Peter Egger & David Greenaway & Tobias Seidel, 2011. "Rigid labour markets with trade and capital mobility: theory and evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 509-540, May.
    10. Xi Yang, 2014. "Labor market frictions, agglomeration, and regional unemployment disparities," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(2), pages 489-512, March.
    11. G. Rayp & B. Vanbergen, 2009. "Are social welfare states facing a race to the bottom? A theoretical perspective," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/572, Ghent University, Faculty of Economics and Business Administration.

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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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