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Integration, Agglomeration and the Political Economics of Factor Mobility

Author

Listed:
  • Ottaviano, G.I.P.
  • Thisse, J.-F.

Abstract

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.

Suggested Citation

  • Ottaviano, G.I.P. & Thisse, J.-F., 1999. "Integration, Agglomeration and the Political Economics of Factor Mobility," Economics Working Papers eco99/27, European University Institute.
    • Handle: RePEc:eui:euiwps:eco99/27
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    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • F15 - International Economics - - Trade - - - Economic Integration

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