Productivity growth, industry location patterns and labor market frictions

Colin Davis and Ken-ichi Hashimoto

Regional Science and Urban Economics, 2022, vol. 97, issue C

Abstract: This paper constructs a two-country model of international trade to study how labor market frictions affect industry location patterns, unemployment rates, and fully endogenous productivity growth. We show that when the larger country offers subsidies to labor search costs or reduces unemployment benefits, the domestic unemployment rate falls, causing greater industry concentration and faster productivity growth, but higher unemployment for the smaller country. When similar labor market policies are implemented in the smaller country, however, the resulting fall in domestic unemployment leads to lower industry concentration and slower productivity growth, while lowering unemployment in the larger country.

Keywords: Labor market frictions; Industry location; Imperfect knowledge spillovers; Endogenous productivity growth (search for similar items in EconPapers)
JEL-codes: E24 J64 O41 R11 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:regeco:v:97:y:2022:i:c:s0166046222000576

DOI: 10.1016/j.regsciurbeco.2022.103817

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