Locational signaling and agglomeration

Marcus Berliant and Yu Chia-Ming

MPRA Paper from University Library of Munich, Germany

Abstract: Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at that location. When workers' marginal willingness to pay for housing is negatively correlated with their productivity, only the core-periphery (partially stratified) equilibria are stable. When workers' marginal willingness to pay for housing and their productivity are positively correlated, there is no core-periphery equilibrium. The urban wage premium is explained when there is core-periphery equilibrium. Furthermore, location can at best be an approximate rather than a precise sieve for high-skill workers.

Keywords: Agglomeration; Adverse Selection; Asymmetric Information; Locational Signaling (search for similar items in EconPapers)
JEL-codes: D51 D82 R13 (search for similar items in EconPapers)
Date: 2014-04-19
New Economics Papers: this item is included in nep-cta, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: LOCATIONAL SIGNALING AND AGGLOMERATION (2015)
Working Paper: Locational signaling and agglomeration (2012)
Working Paper: Locational signaling and agglomeration (2010)
Working Paper: Locational signaling and agglomeration (2009)
Working Paper: Locational signaling and agglomeration (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:55410

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