Trade and Industrial Location with Heterogeneous Labor

Mary Amiti () and Christopher A Pissarides ()

No 04/103, IMF Working Papers from International Monetary Fund

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 interregional 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 that 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.

Keywords: Trade liberalization; Labor mobility; Economic models (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-int
Date: 2004-07-02
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Related works:
Working Paper: Trade and Industrial Location with Heterogenous Labour (2002)
Working Paper: Trade and Industrial Location with Heterogeneous Labor (2002)
Journal Article: Trade and industrial location with heterogeneous labor (2005)
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