Trade and industrial location with heterogeneous labor

Amiti, Mary and Pissarides, Christopher ORCID: 0000-0002-0695-058X (2002) Trade and industrial location with heterogeneous labor. CEP discussion paper; CEPDP0541 (541). London School of Economics and Political Science. Centre for Economic Performance, London, UK. ISBN 0-75-301562-5

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Abstract

We show in the framework of a new economic geography model that when labor is heterogenous and productivity depends on the quality of the match between job and worker, trade liberalization may lead to industrial agglomeration and inter-industry trade. The agglomeration force is the improvement in the quality of matches when firms recruit from a bigger pool of labor. The forces against agglomeration are the existence of trade costs and monopoly power in the labor market. We show that more heterogeneity in skills attracts both firms and workers to bigger markets and supports agglomeration at higher trade costs.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2002 M. Amiti and C. A. Pissarides
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HD Industries. Land use. Labor
JEL classification:	F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies
Date Deposited:	27 Apr 2007
Last Modified:	13 Sep 2024 19:47
URI:	http://eprints.lse.ac.uk/id/eprint/2274

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