Working Paper: CEPR ID: DP9901
Authors: Takatoshi Tabuchi; Jacques-François Thisse; Xiwei Zhu
Abstract: New economic geography focuses on the impact of falling transport costs on the spatial distribution of activities. However, it disregards the role of technological innovations, which are central to modern economic growth, as well as the role of migration costs, which are a strong impediment to moving. We show that this neglect is unwarranted. Regardless of the level of transport costs, rising labor productivity fosters the agglomeration of activities, whereas falling transport costs do not affect the location of activities. When labor is heterogeneous, the number of workers residing in the more productive region increases by decreasing order of productive efficiency when labor productivity rises.
Keywords: Labor Heterogeneity; Labor Productivity; Migration Costs; New Economic Geography; Technological Progress
JEL Codes: J61; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rising labor productivity (J24) | agglomeration of economic activities (R11) |
| higher productivity (O49) | clustering of activities in more productive regions (R11) |
| falling transport costs (R41) | location of activities (R53) |
| migration costs (F22) | distribution of labor across regions (R12) |