Integration, Agglomeration and the Political Economics of Factor Mobility
CEPR Working Paper No. 2185
Posted: 10 Jan 2000
Date Written: July 1999
This paper tackles the issue of the optimality of agglomeration in a two-region economy with skilled/mobile and unskilled immobile workers. The market leads to the optimal outcome when transport costs are high or low. However, for intermediate values, it yields agglomeration whereas dispersion is socially desirable. We show that competitive lobbying on factor mobility by the two groups of workers sustains the second best optimum.
JEL Classification: F12, F22, R13, R38
Suggested Citation: Suggested Citation