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A Simple Theory of Industry Location and Residence Choice

Rainald Borck (), Michael P. Pflüger () and Matthias Wrede ()
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Michael P. Pflüger: University of Würzburg

No 2862, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides a simple theory of geographical mobility which simultaneously explains people’s choice of residences in space and the location of industry. Residences are chosen on the basis of the utility which mobile households obtain across locations. The spatial pattern of industry is determined by the location decision of a scarce essential factor of production which seeks to obtain the highest possible economic return. Our theory comprehends applications to commuting and physical capital mobility. Referring to the decline in mobility costs, we are able to explain that long-distance commuting and foreign direct investment have increased and that industrial activity has become more concentrated both within as well as across countries.

Keywords: industry location; capital mobility; labour mobility; agglomeration; commuting; migration (search for similar items in EconPapers)
JEL-codes: F12 F21 F22 R12 R23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-mig and nep-ure
Date: 2007-06
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Published in revised form in: Journal of Economic Geography, 2010, 10 (6), 913 - 940

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