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Locational signaling and agglomeration

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  • Berliant, Marcus
  • Yu, Chia-Ming

Abstract

Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at a location. When workers’ marginal utility of housing is negatively correlated with their productivity, skill-biased technological change causes a core-periphery bifurcation where the agglomeration of high-skill workers eventually constitutes a unique stable equilibrium. When workers’ marginal utility of housing and their productivity are positively correlated, skill-biased technological improvements will never result in a core-periphery equilibrium. Location can at best be an approximate rather than a precise sieve for high skill workers.

Suggested Citation

  • Berliant, Marcus & Yu, Chia-Ming, 2009. "Locational signaling and agglomeration," MPRA Paper 24799, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24799
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    References listed on IDEAS

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    1. repec:bla:ijethy:v:13:y:2017:i:1:p:113-145 is not listed on IDEAS
    2. Feder, Christophe & Kataishi, Rodrigo Ezequiel, 2017. "Decentralization in Heterogeneous Regions: A Biased Technological Change Approach," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201703, University of Turin.
    3. Kiyohiro Ikeda & Kazuo Murota & Takashi Akamatsu & Yuki Takayama, 2017. "Agglomeration patterns in a long narrow economy of a new economic geography model: Analogy to a racetrack economy," International Journal of Economic Theory, The International Society for Economic Theory, vol. 13(1), pages 113-145, March.

    More about this item

    Keywords

    Agglomeration; Adverse Selection; Asymmetric Information; Locational Signaling;

    JEL classification:

    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies

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