Locational signaling and agglomeration

Marcus Berliant and Chia-Ming Yu

MPRA Paper from University Library of Munich, Germany

Abstract: Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at a location. When workers’ price elasticity of demand for housing is negatively correlated with their productivity, skill-biased technological change causes a core-periphery bifurcation where the agglomeration of high-skill workers eventually constitutes a unique stable equilibrium. When workers’ price elasticity of demand for housing and their productivity are positively correlated, skill-biased technological improvements will never result in a core periphery equilibrium. This paper claims that location can at best be an approximate rather than a precise sieve for high-skill workers.

Keywords: Agglomeration; Adverse Selection; Asymmetric Information; Locational Signaling (search for similar items in EconPapers)
JEL-codes: D51 D82 R13 (search for similar items in EconPapers)
Date: 2009-12-19
New Economics Papers: this item is included in nep-cta, nep-geo and nep-ure
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https://mpra.ub.uni-muenchen.de/19462/1/MPRA_paper_19462.pdf original version (application/pdf)

Related works:
Journal Article: LOCATIONAL SIGNALING AND AGGLOMERATION (2015)
Working Paper: Locational signaling and agglomeration (2014)
Working Paper: Locational signaling and agglomeration (2012)
Working Paper: Locational signaling and agglomeration (2010)
Working Paper: Locational signaling and agglomeration (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19462

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