Amiti, Mary and Pissarides, Christopher
Trade and industrial location with heterogeneous labor.
CEP discussion paper; CEPDP0541,
Centre for Economic Performance, London School of Economics and Political Science, London, UK.
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.
||© 2002 M. Amiti and C. A. Pissarides
||agglomeration, matching, spatial mismatch, inter-regional trade
|Library of Congress subject classification:
||H Social Sciences > HD Industries. Land use. Labor
|Journal of Economic Literature Classification System:
||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
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