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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. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  2. Guy Dumais & Glenn Ellison & Edward Glaeser, 1997. "Geographic Concentration as a Dynamic Process," NBER Working Papers 6270, National Bureau of Economic Research, Inc.
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  8. Sato, Yasuhiro, 2001. "Labor Heterogeneity in an Urban Labor Market," Journal of Urban Economics, Elsevier, vol. 50(2), pages 313-337, September.
  9. Amiti, Mary & Cameron, Lisa, 2004. "Economic Geography and Wages," CEPR Discussion Papers 4234, C.E.P.R. Discussion Papers.
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  13. repec:hhs:iuiwop:430 is not listed on IDEAS
  14. Fredrik Andersson & Simon Burgess & Julia Lane, 2004. "Cities, Matching and the Productivity Gains of Agglomeration," CEP Discussion Papers dp0648, Centre for Economic Performance, LSE.
  15. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, December.
  16. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  17. Mary Amiti & Lisa Ann Cameron, 2004. "Economic Geography and Wages; The Case of Indonesia," IMF Working Papers 04/79, International Monetary Fund.
  18. Economides, Nicholas, 1989. "Symmetric equilibrium existence and optimality in differentiated product markets," Journal of Economic Theory, Elsevier, vol. 47(1), pages 178-194, February.
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