Comparative Advantage and Skill Premium of Regions

Kohei Nagamachi ()
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Kohei Nagamachi: Graduate School of Economics, The University of Tokyo

Economics Bulletin, 2013, vol. 33, issue 3, 1681-1694

Abstract: This paper provides one explanation for why a positive correlation is observed between the 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 as well as a continuum of industries or tasks within a production process. It is found that the positive correlation emerges through the interaction between the location-occupation choice by individuals and regional comparative advantage. Spatial equilibrium, sorting, and product differentiation play a key role in determining the way in which such an interaction works.

Keywords: comparative advantage; skill premium; sorting (search for similar items in EconPapers)
JEL-codes: R0 (search for similar items in EconPapers)
Date: 2013-07-11
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