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Agglomeration with the pros and cons of labor heterogeneity

  • Ryusuke Ihara

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    Using a simple two-region model with the positive and negative effects of labor heterogeneity, we investigate the agglomeration pattern of entrepreneurs and the commuting pattern of heterogeneous workers. Labor heterogeneity is a source of productivity for e.g. high-tech industries as well as is an obstacle to e.g. mass production. As a result, we show that entrepreneurs tend to concentrate to a region hence regional labor markets are united with interregional commuting when (i) the commuting cost or (ii) the adjustment cost of labor heterogeneity is low, and when (iii) the input of heterogeneous labor is large. These results explain: the progress of urbanization with the decrease in commuting costs; the difference in the agglomeration tendency of industries.

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    File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa11/e110830aFinal00528.pdf
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    Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p528.

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    Date of creation: Sep 2011
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    Handle: RePEc:wiw:wiwrsa:ersa11p528
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    1. Berliant, Marcus & Fujita, Masahisa, 2010. "The Dynamics of Knowledge Diversity and Economic Growth," MPRA Paper 21009, University Library of Munich, Germany.
    2. Berliant, Marcus & Fujita, Masahisa, 2011. "Culture and diversity in knowledge creation," MPRA Paper 27997, University Library of Munich, Germany.
    3. Gianmarco I.P. Ottaviano & Giovanni Prarolo, 2009. "Cultural Identity and Knowledge Creation in Cosmopolitan Cities," Working Papers 2009.72, Fondazione Eni Enrico Mattei.
    4. BEHRENS, Kristian & SATO, Yasuhiro, 2006. "Labor market integration and migration: impacts on skill formation and the wage structure," CORE Discussion Papers 2006001, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Masahisa Fujita & Marcus Berliant, 2004. "Knowledge Creation as a Square Dance on the Hilbert Cube," Econometric Society 2004 North American Summer Meetings 204, Econometric Society.
    6. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    7. Sparber, Chad, 2008. "A theory of racial diversity, segregation, and productivity," Journal of Development Economics, Elsevier, vol. 87(2), pages 210-226, October.
    8. Sparber, Chad, 2007. "Racial Diversity and Aggregate Productivity in U.S. Industries: 1980-2000," Working Papers 2007-02, Department of Economics, Colgate University.
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