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Elastic Labor Supply and Agglomeration

Takanori Ago (), Tadashi Morita (), Takatoshi Tabuchi () and Kazuhiro Yamamoto ()
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Takanori Ago: ySchool of Commerce, Senshu University
Kazuhiro Yamamoto: Graduate School of Economics, Osaka University

No 17-06, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: This study analyzes the interplay between the agglomeration of economic activities and interregional diverences 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.

Keywords: elastic labor supply; agglomeration; symmetry break (search for similar items in EconPapers)
JEL-codes: R23 F16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-lab and nep-ure
Date: 2017-03
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Related works:
Journal Article: Elastic labor supply and agglomeration (2018) Downloads
Working Paper: Elastic Labor Supply and Agglomeration (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:1706

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