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Trade and Industrial Location with Heterogenous Labour

  • Amiti, Mary
  • Pissarides, Christopher

We show in the framework of a new economic geography model that when labour is heterogenous and productivity depends on the quality of the match between job and worker, trade liberalization may lead to industrial agglomeration and inter-industry trade. The agglomeration force is the improvement in the quality of matches when firms recruit from a bigger pool of labour. The forces against agglomeration are the existence of trade costs and monopoly power in the labour market. We show that more heterogeneity in skills attracts both firms and workers to bigger markets and supports agglomeration at higher trade costs.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3366.

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Date of creation: May 2002
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Handle: RePEc:cpr:ceprdp:3366
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  1. Fredrik Andersson & Simon Burgess & Julia Lane, 2004. "Cities, Matching and the Productivity Gains of Agglomeration," CEP Discussion Papers dp0648, Centre for Economic Performance, LSE.
  2. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  3. Mary Amiti & Lisa Cameron, 2007. "Economic Geography and Wages," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 15-29, February.
  4. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
  5. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  6. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
  7. d'ASPREMONT, Claude & GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "On Hotelling's "Stability in competition"," CORE Discussion Papers RP -385, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, June.
  9. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
  10. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
  11. Guy Dumais & Glenn Ellison & Edward Glaeser, 1997. "Geographic Concentration as a Dynamic Process," NBER Working Papers 6270, National Bureau of Economic Research, Inc.
  12. Julio J. Rotemberg & Garth Saloner, 1990. "Competition and Human Capital Accumulation: A Theory of Interregional Specialization and Trade," NBER Working Papers 3228, National Bureau of Economic Research, Inc.
  13. Thisse, Jacques-Francois & Zenou, Yves, 2000. "Skill mismatch and unemployment," Economics Letters, Elsevier, vol. 69(3), pages 415-420, December.
  14. B Petrongolo & Christopher Pissarides, 2003. "Scale effects in markets with search," LSE Research Online Documents on Economics 2248, London School of Economics and Political Science, LSE Library.
  15. repec:dgr:uvatin:2002061 is not listed on IDEAS
  16. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  17. repec:dgr:uvatin:20020061 is not listed on IDEAS
  18. Mary Amiti & Lisa Ann Cameron, 2004. "Economic Geography and Wages; The Case of Indonesia," IMF Working Papers 04/79, International Monetary Fund.
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