LOCATIONAL SIGNALING AND AGGLOMERATION

Marcus Berliant and Chia-Ming Yu

Journal of Regional Science, 2015, vol. 55, issue 5, 757-773

Abstract: type="main">

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 a core-periphery equilibrium. Furthermore, location can at best be an approximate rather than a precise sieve for high-skill workers.

Date: 2015
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Related works:
Working Paper: Locational signaling and agglomeration (2014)
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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