Abstract

http://ssrn.com/abstract=878927
 
 

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Trade and Industrial Location with Heterogeneous Labor


Mary Amiti


International Monetary Fund (IMF) - Trade Unit; University of Melbourne - Department of Economics; Centre for Economic Policy Research (CEPR)

Christopher A. Pissarides


London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

June 2004

IMF Working Paper No. 04/103

Abstract:     
We show in the context of a new economic geography model that when labor is heterogenous trade liberalization may lead to industrial agglomeration and interregional trade. Labor heterogeneity gives local monopoly power to firms but also introduces variations in the quality of the job match. Matches are likely to be better when there are more firms and workers in the local market, giving rise to an agglomeration force that can offset the forces against trade costs and the erosion of monopoly power. We derive analytically a robust agglomeration equilibrium and illustrate its properties with numerical simulations.

Number of Pages in PDF File: 26

Keywords: Agglomeration, matching, spatial mismatch, interregional trade

JEL Classification: F12, J41, R12, R13

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Date posted: February 15, 2006  

Suggested Citation

Amiti, Mary and Pissarides, Christopher A., Trade and Industrial Location with Heterogeneous Labor (June 2004). IMF Working Paper, Vol. , pp. 1-26, 2004. Available at SSRN: http://ssrn.com/abstract=878927

Contact Information

Mary Amiti (Contact Author)
International Monetary Fund (IMF) - Trade Unit ( email )
700 19th Street NW
Washington, DC 20431
United States
202-986-3572 (Phone)
202-589-7767 (Fax)
University of Melbourne - Department of Economics ( email )
Melbourne, 3010
Australia
+61 3 8344 7652 (Phone)
+61 3 8344 6899 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Christopher Pissarides
London School of Economics & Political Science (LSE) ( email )
Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7513 (Phone)
+44 20 7831 1840 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
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