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Labor Differentiation and Agglomeration in General Equilibrium

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  • Berliant, Marcus
  • Zenou, Yves

Abstract

The aim of this paper is to explore the structure of cities as a function of labor differentiation, gains to trade, a fixed cost for constructing the transportation network, a variable cost of commodity transport, and the commuting costs of consumers. Firms use different types of labor to produce different outputs. Locations of all agents are endogenous as are prices and quantities. This is among the first papers to apply smooth economy techniques to urban economics. Existence of equilibrium and its determinacy properties depend crucially on the relative numbers of outputs, types of labor and firms. More differentiated labor implies more equilibria. We provide tight lower bounds on labor differentiation for existence of equilibrium. If these sufficient conditions are satisfied, then generically there is a continuum of equilibria for given parameter values. Finally, an equilibrium allocation is not necessarily Pareto optimal in this model.

Suggested Citation

  • Berliant, Marcus & Zenou, Yves, 2012. "Labor Differentiation and Agglomeration in General Equilibrium," CEPR Discussion Papers 8840, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8840
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    Cited by:

    1. Fan-chin Kung, 2004. "Genericity analysis of split bifurcations," GE, Growth, Math methods 0410008, University Library of Munich, Germany, revised 24 Nov 2004.
    2. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in regional migration dynamics," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 714-720, November.
    3. David E. Wildasin, 2000. "Labor-Market Integration, Investment in Risky Human Capital, and Fiscal Competition," American Economic Review, American Economic Association, vol. 90(1), pages 73-95, March.
    4. Berliant, Marcus & Kung, Fan-chin, 2006. "The indeterminacy of equilibrium city formation under monopolistic competition and increasing returns," Journal of Economic Theory, Elsevier, vol. 131(1), pages 101-133, November.

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    More about this item

    Keywords

    city structure; general equilibrium; heterogeneous labour; transportation network;
    All these keywords.

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

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