Footloose Capital, Educational Choice, and Wage Inequality

Yoshifumi Kon
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Yoshifumi Kon: Utsunomiya Kyowa University

No CIRJE-F-1200, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This study investigates wage inequality between high- and low-skilled workers in a two- region footloose capital model with endogenous educational choices. Firms’ location decisions are governed by two opposing forces: agglomeration force and dispersion force. Comparative statics are conducted regarding the transportation costs of the differentiated goods sector. When consumers’ preference for differentiated goods are weak relative to homogeneous goods, declining transportation costs push firms from the populous region to the peripheral. Furthermore, wage inequality in the core region shrinks, but expands in the peripheral region.

Pages: 17 pages
Date: 2022-09
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2022cf1200

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