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Trade and industrial location with heterogeneous labor

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

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Identification Number: 541

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
Subjects: H Social Sciences > HD Industries. Land use. Labor
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Series: Working Papers > CEP Discussion Papers
Date Deposited: 27 Apr 2007
Last Modified: 14 Nov 2012 10:19
URI: http://eprints.lse.ac.uk/id/eprint/2274

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