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Integration, Agglomeration and the Political Economics of Factor Mobility

Listed author(s):
  • 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2185.

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Date of creation: Jul 1999
Handle: RePEc:cpr:ceprdp:2185
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