Working Paper: CEPR ID: DP3114
Authors: Takatoshi Tabuchi; Jacques-François Thisse
Abstract: This Paper investigates the impact of the heterogeneity of the labour 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: agglomeration; logit; migrations; spatial equity; wage differential
JEL Codes: O15; O18; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| taste heterogeneity (L15) | spatial distribution of industries (R32) |
| transport costs decrease (R41) | spatial distribution of industries (R32) |
| spatial distribution (R12) | wage differentials (J31) |
| wage differentials (J31) | trade costs (F19) |
| Rawlsian equity (D63) | industry dispersion (L19) |
| efficiency (D61) | excessive agglomeration (R11) |
| technological advancements in transport (L92) | agglomeration in developing countries (R11) |