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Labour Pooling, Labour Poaching and Spatial Clustering

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  • Duranton, Gilles
  • Combes, Pierre-Philippe

Abstract

When firms cluster in the same local labour market, they face a trade-off between the benefits of labour pooling (i.e., access to workers whose knowledge helps reduce costs) and the costs of labour poaching (i.e., loss of some key workers to competition and the indirect effect of a higher wage bill to retain the others). We explore this trade-off in a duopoly game. Depending on market size and on the degree of horizontal differentiation between products, we characterize the strategic choices of firms regarding locations, wages, poaching and prices. Our results show that co-location, although it is always efficient, is not in general the equilibrium outcome.

Suggested Citation

  • Duranton, Gilles & Combes, Pierre-Philippe, 2001. "Labour Pooling, Labour Poaching and Spatial Clustering," CEPR Discussion Papers 2975, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2975
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    More about this item

    Keywords

    Labour pooling; Labour poaching; Firm clustering; Agglomeration;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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