Labor Market Pooling and Human Capital Investment Decisions

30 Pages Posted: 28 Sep 2009

See all articles by Elke Amend

Elke Amend

affiliation not provided to SSRN

Patrick Herbst

University of Stirling - Department of Accounting and Finance

Date Written: September 28, 2009

Abstract

Labor market pooling is considered one of the advantages of agglomerations. This paper presents a model of human capital formation in an imperfectly competitive, pooled local labor market with heterogeneous workers and firms. Firms produce with different technologies requiring diverse skills. Workers specialize into specific skills and accumulate general human capital. While labor market pooling provides static efficiency gains, our results also imply positive long-term effects: Under a diversified structure, firm-specific shocks increase workers' incentives to acquire both general and specific human capital. This not only raises productivity but also strengthens a region's capability to adapt to change.

Keywords: Human capital, labor market pooling, agglomeration economies, unemployment

JEL Classification: I20, J24, J41

Suggested Citation

Amend, Elke and Herbst, Patrick, Labor Market Pooling and Human Capital Investment Decisions (September 28, 2009). Available at SSRN: https://ssrn.com/abstract=1479393 or http://dx.doi.org/10.2139/ssrn.1479393

Elke Amend

affiliation not provided to SSRN ( email )

Patrick Herbst (Contact Author)

University of Stirling - Department of Accounting and Finance ( email )

Stirling, Scotland FK9 4LA
United Kingdom

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