Skills, Agglomeration and Segmentation

45 Pages Posted: 29 Jan 2001

See all articles by Tomoya Mori

Tomoya Mori

Institute of Economic Research, Kyoto University; Research Institute of Economy, Trade and Industry (RIETI)

Alessandro Turrini

European Commission; Centre for Economic Policy Research (CEPR)

Date Written: December 2000

Abstract

We investigate the role of skill heterogeneity in explaining location patterns induced by pecuniary externalities (Krugman (1991)). In our setting, sellers with higher skills perform better in the marketplace, and their sales are larger. Selling to distant locations leads to lower sales because of both pecuniary) transport costs and communication costs that reduce the perceived quality of goods. A symmetry-breaking result is obtained: symmetric configurations cannot be stable, and regional inequality is inevitable. The relatively more skilled choose to stay in the location with higher aggregate income and skill, while the relatively less skilled stay in the other. The model allows us to analyse the links between the extent of interregional inequality and the extent of interpersonal skill inequality.

Keywords: Agglomeration, Core-Periphery Model, Interpersonal Inequality, Regional Inequality, Skill Heterogeneity, Transport and Communication Costs

JEL Classification: F12, F16, R12, R13

Suggested Citation

Mori, Tomoya and Turrini, Alessandro, Skills, Agglomeration and Segmentation (December 2000). CEPR Discussion Paper No. 2645. Available at SSRN: https://ssrn.com/abstract=258077

Tomoya Mori (Contact Author)

Institute of Economic Research, Kyoto University ( email )

Yoshida-Honmachi
Sakyo-ku
Kyoto, Kyoto 606-8501
Japan
00 81 75 753 7121 (Phone)

HOME PAGE: http://www.kier.kyoto-u.ac.jp/~mori/

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Alessandro Turrini

European Commission ( email )

Office BU-10/113
B-1049 Brussels
Belgium
+32 2 299 5072 (Phone)
+32 2 299 3505 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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