Trade and industrial location with heterogeneous labor

Amiti, Mary and Pissarides, Christopher ORCID: 0000-0002-0695-058X (2005) Trade and industrial location with heterogeneous labor. Journal of International Economics, 67 (2). pp. 392-412. ISSN 0022-1996

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Abstract

We show in the context of a new economic geography model that when labor is heterogenous trade liberalization may lead to industrial agglomeration and inter-regional trade. Labor heterogeneity gives local monopoly power to firms but also introduces variations in the quality of the job match. Matches are likely to be better when there are more firms and workers in the local market, giving rise to an agglomeration force which can offset the forces against, trade costs and the erosion of monopoly power. We derive analytically a robust agglomeration equilibrium and illustrate its properties with numerical simulations.

Item Type:	Article
Official URL:	http://www.elsevier.com/locate/inca/505552/
Additional Information:	© 2005 Elsevier
Divisions:	Centre for Economic Performance Economics
Subjects:	H Social Sciences > HF Commerce H Social Sciences > HB Economic Theory H Social Sciences > HD Industries. Land use. Labor
JEL classification:	R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
Date Deposited:	27 Jun 2007
Last Modified:	12 Nov 2024 03:51
URI:	http://eprints.lse.ac.uk/id/eprint/2475

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