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Comparative Advantage and Skill Premium of Regions

  • Kohei Nagamachi

    (Faculty of Economics, University of Tokyo)

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    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.

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    Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-868.

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    Length: 31 pages
    Date of creation: Nov 2012
    Date of revision:
    Handle: RePEc:tky:fseres:2012cf868
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    1. Nathaniel Baum-Snow & Ronni Pavan, 2013. "Inequality and City Size," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1535-1548, December.
    2. Volker Nocke, 2003. "A Gap for Me: Entrepreneurs and Entry," PIER Working Paper Archive 03-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    3. Mori Mori, Tomoya & Turrini, Alessandro Antonio, 2000. "Skills, Agglomeration and Segmentation," CEPR Discussion Papers 2645, C.E.P.R. Discussion Papers.
    4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    5. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
    6. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
    7. Gene M. Grossman & Esteban Rossi-Hansberg, 2006. "Trading Tasks: A Simple Theory of Offshoring," NBER Working Papers 12721, National Bureau of Economic Research, Inc.
    8. Pflüger, Michael & Tabuchi, Takatoshi, 2010. "The size of regions with land use for production," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 481-489, November.
    9. Donald R. Davis & Jonathan I. Dingel, 2012. "A Spatial Knowledge Economy," NBER Working Papers 18188, National Bureau of Economic Research, Inc.
    10. 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 823-39, December.
    11. Edward L. Glaeser & Matt Resseger & Kristina Tobio, 2009. "Inequality In Cities," Journal of Regional Science, Wiley Blackwell, vol. 49(4), pages 617-646.
    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, 02.
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