Trade and Industrial Location with Heterogenous Labour

Mary Amiti () and Christopher A Pissarides ()

No 3366, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We show in the framework of a new economic geography model that when labour 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 labour. The forces against agglomeration are the existence of trade costs and monopoly power in the labour market. We show that more heterogeneity in skills attracts both firms and workers to bigger markets and supports agglomeration at higher trade costs.

Keywords: agglomeration; inter-regional trade; matching; spacial mismatch (search for similar items in EconPapers)
JEL-codes: F12 J41 R12 R13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-lam
Date: 2002-05
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Related works:
Working Paper: Trade and Industrial Location with Heterogeneous Labor (2004)
Working Paper: Trade and Industrial Location with Heterogeneous Labor (2002)
Journal Article: Trade and industrial location with heterogeneous labor (2005)
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