Labor Pooling, Labor Poaching and Spatial Clustering
38 Pages Posted: 16 Oct 2001
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: Suggested Citation
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