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Integration, agglomeration and the political economics of factor mobility

  • OTTAVIANO, Gianmarco
  • THISSE, Jacques-François

This paper tackles the issue of the optimality of agglomeration in a two-region economy with skilled/mobile and unskilled/immobile workers. The market leads to the optimal outcome when transport costs are high or low. However, for intermediate values, it yields agglomeration whereas dispersion is socially desirable. We show that competitive lobbying on factor mobility by the two groups of workers sustains the second best optimum.

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File URL: http://dx.doi.org/10.1016/S0047-2727(00)00166-3
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number 1541.

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Handle: RePEc:cor:louvrp:1541
Note: In : Journal of Public Economics, 83, 429-456, 2002
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  17. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  18. Shields, Gail M & Shields, Michael P, 1989. " The Emergence of Migration Theory and a Suggested New Direction," Journal of Economic Surveys, Wiley Blackwell, vol. 3(4), pages 277-304.
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  20. George J. Borjas, 1995. "The Economic Benefits from Immigration," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 3-22, Spring.
  21. Philippe Martin, 1998. "Can Regional Policies Affect Growth and Geography in Europe?," The World Economy, Wiley Blackwell, vol. 21(6), pages 757-774, 08.
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