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Labor Differentiation and Agglomeration in General Equilibrium

  • Marcus Berliant

    (Washington University in St. Louis)

  • Yves Zenou

    (University of Southampton)

The aim of this paper is to explore the structure of cities as a function of labor differentiation, gains to trade, a fixed cost for constructing the transportation network, a variable cost of commodity transport, and the commuting costs of consumers. Firms use different types of labor to produce different outputs. Locations of all agents are endogenous as are prices and quantities. To our knowledege, this is the first paper that applies smooth economy techniques to urban economics. Existence of equilibrium and its determinacy properties depend crucially on the relative numbers of outputs, types of labor and firms. More differentiated labor implies more equilibria. We provide tight lower bounds on labor differentiation for existence of equilibrium. If these sufficient conditions are satisfied, then generically there is a continuum of equilibria for given parameter values. Finally, an equilibrium allocation is not necessarily Pareto optimal in this model.

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File URL: http://econwpa.repec.org/eps/urb/papers/0408/0408003.pdf
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Paper provided by EconWPA in its series Urban/Regional with number 0408003.

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Length: 50 pages
Date of creation: 10 Aug 2004
Date of revision:
Handle: RePEc:wpa:wuwpur:0408003
Note: Type of Document - pdf; pages: 50
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc.
  2. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in regional migration dynamics," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 714-720, November.
  3. Berliant, M. & Fujita, M., 1990. "Alonso'S Discrete Population Model Of Land Use: Efficient Allocations And Competitive Equilibria," RCER Working Papers 217, University of Rochester - Center for Economic Research (RCER).
  4. Tjalling C. Koopmans & Martin J. Beckmann, 1955. "Assignment Problems and the Location of Economic Activities," Cowles Foundation Discussion Papers 4, Cowles Foundation for Research in Economics, Yale University.
  5. Fujita, Masahisa & Ogawa, Hideaki, 1982. "Multiple equilibria and structural transition of non-monocentric urban configurations," Regional Science and Urban Economics, Elsevier, vol. 12(2), pages 161-196, May.
  6. Fujita, Masahisa & Thisse, Jacques-Francois, 1986. "Spatial Competition with a Land Market: Hotelling and Von Thunen Unified," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 819-41, October.
  7. Berliant, Marcus & Wang, Ping, 1993. "Endogenous formation of a city without agglomerative externalities or market imperfections : Marketplaces in a regional economy," Regional Science and Urban Economics, Elsevier, vol. 23(1), pages 121-144, March.
  8. Fujita, Masahisa, 1988. "A monopolistic competition model of spatial agglomeration : Differentiated product approach," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 87-124, February.
  9. Starrett, David, 1978. "Market allocations of location choice in a model with free mobility," Journal of Economic Theory, Elsevier, vol. 17(1), pages 21-37, February.
  10. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
  11. Anderson, Simon P & Engers, Maxim, 1994. "Spatial Competition with Price-Taking Firms," Economica, London School of Economics and Political Science, vol. 61(242), pages 125-36, May.
  12. Baumgardner, James R, 1988. "The Division of Labor, Local Markets, and Worker Organization," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 509-27, June.
  13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  14. Ellickson, Bryan, 1979. "Competitive equilibrium with local public goods," Journal of Economic Theory, Elsevier, vol. 21(1), pages 46-61, August.
  15. Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers.
  16. Grimaud, A. & Laffont, J. J., 1989. "Existence of a spatial equilibrium," Journal of Urban Economics, Elsevier, vol. 25(2), pages 213-218, March.
  17. Kim, Sunwoong, 1991. "Heterogeneity of labor markets and city size in an open spatial economy," Regional Science and Urban Economics, Elsevier, vol. 21(1), pages 109-126, May.
  18. Berliant, Marcus & ten Raa, Thijs, 1994. "Regional science: The state of the art," Regional Science and Urban Economics, Elsevier, vol. 24(5), pages 631-647, October.
  19. Schweizer, Urs & Varaiya, Pravin & Hartwick, John, 1976. "General equilibrium and location theory," Journal of Urban Economics, Elsevier, vol. 3(3), pages 285-303, July.
  20. Hamilton, J.H. & Macleod, W.P. & Thisse, J.F., 1988. "Spatial Competition And The Core," Papers 88-6, Florida - College of Business Administration.
  21. Kim, Sunwoong, 1989. "Labor Specialization and the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 692-705, June.
  22. Berliant, Marcus & Konishi, Hideo, 2000. "The endogenous formation of a city: population agglomeration and marketplaces in a location-specific production economy," Regional Science and Urban Economics, Elsevier, vol. 30(3), pages 289-324, May.
  23. repec:cup:cbooks:9780521265140 is not listed on IDEAS
  24. Berliant, Marcus & Kung, Fan-chin, 2006. "The indeterminacy of equilibrium city formation under monopolistic competition and increasing returns," Journal of Economic Theory, Elsevier, vol. 131(1), pages 101-133, November.
  25. Papageorgiou, Yorgo Y & Smith, Terrence R, 1983. "Agglomeration as Local Instability of Spatially Uniform Steady-States," Econometrica, Econometric Society, vol. 51(4), pages 1109-19, July.
  26. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
  27. Abdel-Rahman, Hesham M., 1990. "Agglomeration economies, types, and sizes of cities," Journal of Urban Economics, Elsevier, vol. 27(1), pages 25-45, January.
  28. Rosen, Sherwin, 1983. "Specialization and Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 43-49, January.
  29. Abdel-Rahman, H. M., 1988. "Product differentiation, monopolistic competition and city size," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 69-86, February.
  30. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, March.
  31. Paul R. Krugman, 1991. "First Nature, Second Nature, and Metropolitan Location," NBER Working Papers 3740, National Bureau of Economic Research, Inc.
  32. Fujita, Masahisa & Krugman, Paul, 1995. "When is the economy monocentric?: von Thunen and Chamberlin unified," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 505-528, August.
  33. Wang, Ping, 1990. "Competitive equilibrium formation of marketplaces with heterogeneous consumers," Regional Science and Urban Economics, Elsevier, vol. 20(3), pages 295-304, November.
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