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Elastic labor supply and agglomeration

Takanori Ago, Tadashi Morita (), Takatoshi Tabuchi and Kazuhiro Yamamoto

Journal of Regional Science, 2018, vol. 58, issue 2, 350-362

Abstract: This study analyzes the interplay between the agglomeration of economic activities and interregional differences in working hours, which are typically longer in large cities, as they are normally more developed than small cities. For this purpose, we develop a two†region model with endogenous labor supply. Although we assume a symmetric distribution of immobile workers, the symmetric equilibrium breaks in the sense that firms may agglomerate when trade costs are intermediate and labor supply is elastic. We also show that the price index is always lower, while labor supply, per capita income, real wages, and welfare are always higher in the more agglomerated region.

Date: 2018
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https://doi.org/10.1111/jors.12361

Related works:
Working Paper: Elastic Labor Supply and Agglomeration (2017) Downloads
Working Paper: Elastic Labor Supply and Agglomeration (2015) Downloads
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