Working Paper: CEPR ID: DP3323
Authors: Pierre M. Picard; Eric Toulemonde
Abstract: This Paper develops a model in which the interaction between product market imperfections, transportation costs, unions and workers immobility across regions creates a tendency for agglomeration of firms when transportation costs are low. The model fits quite well the European experience. It is able to explain the emergence of a centre-periphery pattern with equally populated regions. In the centre, most people work in the unionized industry and earn large wages. In contrast, workers in the periphery are employed at a low wage in a constant return to scale industry.
Keywords: Agglomeration; Monopolistic Competition; Unions
JEL Codes: F12; F15; J51; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Low transportation costs, Product market imperfections, Unions (F12) | Agglomeration of firms (R32) |
| Low transportation costs, Product market imperfections, Unions (F12) | Wage differences between regions (J31) |
| Wage differences between regions (J31) | Agglomeration of firms (R32) |