Skills, Agglomeration and Segmentation

Alessandro Turrini and Tomoya Mori

No 2645, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We investigate the role of skill heterogeneity in explaining location patterns induced by pecuniary externalities (Krugman (1991)). In our setting, sellers with higher skills perform better in the marketplace, and their sales are larger. Selling to distant locations leads to lower sales because of both (pecuniary) transport costs and communication costs that reduce the perceived quality of goods. A symmetry-breaking result is obtained: symmetric configurations cannot be stable, and regional inequality is inevitable. The relatively more skilled choose to stay in the location with higher aggregate income and skill, while the relatively less skilled stay in the other. The model allows us to analyse the links between the extent of interregional inequality and the extent of interpersonal skill inequality.

Keywords: Skill heterogeneity; Agglomeration; Core-periphery model; Regional inequality; Interpersonal inequality; Transport and communication costs (search for similar items in EconPapers)
JEL-codes: F12 F16 R12 R13 (search for similar items in EconPapers)
Date: 2000-12
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Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Skills, agglomeration and segmentation (2005)
Working Paper: Skills, Agglomeration and Segmentation (2000)
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