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Comparative Advantage and Skill Premium of Regions

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  • Kohei Nagamachi

    (Faculty of Economics, University of Tokyo)

Abstract

This paper provides one explanation of why there is observed a positive correlation between skill premium and income of regions. In doing so, this paper provides a model of self-organized sorting and skill premium with a continuum of heterogeneous individuals and that of industries or tasks within a production process. It is found that the positive correlation merges through the interaction between the location-occupation choice by individuals and regional comparative advantage. The spatial equilibrium, sorting, and product differentiation play a key role in determining the way how such interaction works.

Suggested Citation

  • Kohei Nagamachi, 2012. "Comparative Advantage and Skill Premium of Regions," CIRJE F-Series CIRJE-F-868, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2012cf868
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2012/2012cf868.pdf
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    References listed on IDEAS

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    9. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    10. Mori, Tomoya & Turrini, Alessandro, 2005. "Skills, agglomeration and segmentation," European Economic Review, Elsevier, vol. 49(1), pages 201-225, January.
    11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    12. Lutz Hendricks, 2011. "The Skill Composition Of U.S. Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 1-32, February.
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