Taste Heterogeneity, Labor Mobility and Economic Geography

37 Pages Posted: 17 Jan 2002

See all articles by Takatoshi Tabuchi

Takatoshi Tabuchi

University of Tokyo - Faculty of Economics

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Date Written: December 2001

Abstract

This Paper investigates the impact of the heterogeneity of the labor force on the spatial distribution of activities. This goal is achieved by applying the tools of discrete choice theory to an economic geography model. We show that taste heterogeneity acts as a strong dispersion force. We also show that the relationship between the spatial distribution of the industry (the wage differential) and trade costs is smooth and bell-shaped. Finally, while Rawlsian equity leads to the dispersion of industry, our analysis reveals that efficiency leads to a solution close to the market outcome, although the latter is likely to involve too much agglomeration compared to the former.

Keywords: Logit, agglomeration, migrations, wage differential, spatial equity

JEL Classification: O15, O18, R13

Suggested Citation

Tabuchi, Takatoshi and Thisse, Jacques-François, Taste Heterogeneity, Labor Mobility and Economic Geography (December 2001). CEPR Discussion Paper No. 3114. Available at SSRN: https://ssrn.com/abstract=297019

Takatoshi Tabuchi (Contact Author)

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan
+81 3 5841 5603 (Phone)
+81 3 5841 5521 (Fax)

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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