Labor Pooling, Labor Poaching and Spatial Clustering

38 Pages Posted: 16 Oct 2001

See all articles by Pierre-Philippe Combes

Pierre-Philippe Combes

Institut d'Etudes Politiques de Paris (Sciences Po) - Department of Economics; Centre for Economic Policy Research (CEPR)

Gilles Duranton

London School of Economics & Political Science (LSE) - Department of Geography and Environment; Centre for Economic Policy Research (CEPR)

Date Written: September 2001

Abstract

When firms cluster in the same local labor market, they face a trade-off between the benefits of labor pooling (i.e., access to workers whose knowledge helps reduce costs) and the costs of labor poaching (i.e., loss of some key workers to competition and the indirect effect of a higher wage bill to retain the others). We explore this trade-off in a duopoly game. Depending on market size and on the degree of horizontal differentiation between products, we characterize the strategic choices of firms regarding locations, wages, poaching and prices. Our results show that co-location, although it is always efficient, is not in general the equilibrium outcome.

Keywords: Labor pooling, labor poaching, firm clustering, agglomeration

JEL Classification: J60, L13, R32

Suggested Citation

Combes, Pierre-Philippe and Duranton, Gilles, Labor Pooling, Labor Poaching and Spatial Clustering (September 2001). Available at SSRN: https://ssrn.com/abstract=286505

Pierre-Philippe Combes (Contact Author)

Institut d'Etudes Politiques de Paris (Sciences Po) - Department of Economics ( email )

28, rue des Saints peres
Paris, 75007
France

HOME PAGE: http://https://www.gate.cnrs.fr/ppcombes

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Gilles Duranton

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 20 7955 7604 (Phone)
+44 20 7955 7412 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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