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Heterogeneous skills and homogeneous land: Segmentation and agglomeration

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  • Wrede, Matthias

Abstract

This paper analyzes the effect of skill heterogeneity on regional patterns of production and housing in the presence of pecuniary externalities within a general-equilibrium framework, assuming monopolistic competition in intermediate goods markets. It shows that the interplay of heterogeneous skills and comparatively homogeneous land demand triggers skill segmentation and agglomeration. The core region that is more attractive to high skilled workers has a disproportionately large share of production at all levels of the supply chain. The paper extensively discusses welfare increasing tax policies. This paper also briefly studies how trade in intermediate goods and endogenous land demand affect segmentation and agglomeration.

Suggested Citation

  • Wrede, Matthias, 2012. "Heterogeneous skills and homogeneous land: Segmentation and agglomeration," FAU Discussion Papers in Economics 04/2012, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
  • Handle: RePEc:zbw:iwqwdp:042012
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    Cited by:

    1. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, Elsevier.
    2. Matthias Wrede, 2013. "Heterogeneous skills, migration, and commuting," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 345-360, June.

    More about this item

    Keywords

    skill heterogeneity; land use; sorting; agglomeration;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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