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Elastic Labor Supply and Agglomeration

Author

Listed:
  • Takanori Ago

    () (ySchool of Commerce, Senshu University)

  • Tadashi Morita

    () (Faculty of Economics, Kindai University)

  • Takatoshi Tabuchi

    () (Faculty of Economics, University of Tokyo)

  • Kazuhiro Yamamoto

    () (Graduate School of Economics, Osaka University)

Abstract

This study analyzes the interplay between the agglomeration of economic activities and interregional diverences in working hours, which are typically longer in large cities, as they are normally more developed than small cities. For this purpose, we develop a two-region model with endogenous labor supply. Although we assume a symmetric distribution of immobile workers, the symmetric equilibrium breaks in the sense that firms may agglomerate when trade costs are intermediate and labor supply is elastic. We also show that the price index is always lower, while labor supply, per capita income, real wages, and welfare are always higher in the more agglomerated region.

Suggested Citation

  • Takanori Ago & Tadashi Morita & Takatoshi Tabuchi & Kazuhiro Yamamoto, 2017. "Elastic Labor Supply and Agglomeration," Discussion Papers in Economics and Business 17-06, Osaka University, Graduate School of Economics.
  • Handle: RePEc:osk:wpaper:1706
    as

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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1706.pdf
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    References listed on IDEAS

    as
    1. Tadashi Morita & Kazuhiro Yamamoto, 2013. "Economic geography, endogenous fertility, and agglomeration," Discussion Papers in Economics and Business 13-23, Osaka University, Graduate School of Economics.
    2. Amiti, Mary & Pissarides, Christopher A., 2005. "Trade and industrial location with heterogeneous labor," Journal of International Economics, Elsevier, vol. 67(2), pages 392-412, December.
    3. Kentaro Nakajima & Takatoshi Tabuchi, 2011. "Estimating Interregional Utility Differentials," Journal of Regional Science, Wiley Blackwell, vol. 51(1), pages 31-46, February.
    4. Picard, Pierre M. & Toulemonde, Eric, 2006. "Firms agglomeration and unions," European Economic Review, Elsevier, vol. 50(3), pages 669-694, April.
    5. Pierre-Philippe Combes & Thierry Mayer & Jacques-François Thisse, 2008. "Economic Geography: The Integration of Regions and Nations," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00311000, HAL.
    6. de Vries, Jan, 1994. "The Industrial Revolution and the Industrious Revolution," The Journal of Economic History, Cambridge University Press, vol. 54(02), pages 249-270, June.
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    8. Dora Gicheva, 2013. "Working Long Hours and Early Career Outcomes in the High-End Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 785-824.
    9. Pierre-Philippe Combes & Thierry Mayer & Jacques-François Thisse, 2008. "Economic Geography: The Integration of Regions and Nations," Post-Print hal-00311000, HAL.
    10. repec:bla:ijethy:v:13:y:2017:i:1:p:73-94 is not listed on IDEAS
    11. Crozet, Matthieu & Trionfetti, Federico, 2008. "Trade costs and the Home Market Effect," Journal of International Economics, Elsevier, vol. 76(2), pages 309-321, December.
    12. Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-968, November.
    13. Tabuchi, Takatoshi & Thisse, Jacques-François, 2011. "A new economic geography model of central places," Journal of Urban Economics, Elsevier, vol. 69(2), pages 240-252, March.
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    More about this item

    Keywords

    elastic labor supply; agglomeration; symmetry break;

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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