Competition and Human Capital Accumulation: a Theory of Interregional Specialization and Trade

43 Pages Posted: 21 Aug 2007

See all articles by Julio J. Rotemberg

Julio J. Rotemberg

Harvard University, Business, Government and the International Economy Unit (deceased); National Bureau of Economic Research (NBER) (deceased)

Garth Saloner

Stanford Graduate School of Business

Date Written: January 1990

Abstract

We consider a model with several regions whose technological ability and factor endowments are identical and in which transport costs between regions are non-negligible. Nonetheless, certain goods are sometimes produced by multiple firms all of which are located in the same region. These goods are then exported from the regions in which their production is agglomerated. Regional agglomeration of production and trade stem from two forces. First, competition between firms for the services of trained workers is necessary for the workers to recoup the cost of acquiring industry-specific human capital. Second, the technology of production is more efficient when plants are larger than a minimum efficient scale and local demand is insufficient to support several firms of that scale. We also study the policy implications of our model.

Suggested Citation

Rotemberg, Julio J. and Saloner, Garth, Competition and Human Capital Accumulation: a Theory of Interregional Specialization and Trade (January 1990). NBER Working Paper No. w3228. Available at SSRN: https://ssrn.com/abstract=430590

Julio J. Rotemberg (Contact Author)

Harvard University, Business, Government and the International Economy Unit (deceased) ( email )

Cambridge, MA
United States
617-495-1015 (Phone)
617-496-5994 (Fax)

National Bureau of Economic Research (NBER) (deceased)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Garth Saloner

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States
(650) 723-1940 (Phone)

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