Comparative Advantage and Skill Premium of Regions

Kohei Nagamachi
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Kohei Nagamachi: Faculty of Economics, University of Tokyo

No CIRJE-F-868, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper provides one explanation of why there is observed a positive correlation between skill premium and income of regions. In doing so, this paper provides a model of self-organized sorting and skill premium with a continuum of heterogeneous individuals and that of industries or tasks within a production process. It is found that the positive correlation merges through the interaction between the location-occupation choice by individuals and regional comparative advantage. The spatial equilibrium, sorting, and product differentiation play a key role in determining the way how such interaction works.

Pages: 31 pages
Date: 2012-11
New Economics Papers: this item is included in nep-geo
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