Berliant, Marcus and Yu, Chia-Ming (2009): Locational signaling and agglomeration.
Download (266Kb) | Preview
Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at a location. When workers’ price elasticity of demand for housing is negatively correlated with their productivity, skill-biased technological change causes a core-periphery bifurcation where the agglomeration of high-skill workers eventually constitutes a unique stable equilibrium. When workers’ price elasticity of demand for housing and their productivity are positively correlated, skill-biased technological improvements will never result in a core periphery equilibrium. This paper claims that location can at best be an approximate rather than a precise sieve for high-skill workers.
|Item Type:||MPRA Paper|
|Original Title:||Locational signaling and agglomeration|
|Keywords:||Agglomeration; Adverse Selection; Asymmetric Information; Locational Signaling|
|Subjects:||R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information; Mechanism Design
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D51 - Exchange and Production Economies
|Depositing User:||Marcus Berliant|
|Date Deposited:||22. Dec 2009 06:13|
|Last Modified:||14. Feb 2013 03:31|
Aghion, Philippe, Eve Caroli, and Cecilia Garcia-Penalosa, “Inequality and Economic Growth: The Perspective of the New Growth Theories,” Journal of Economic Literature, XXXVII (1999), 1615–1660.
Austen-Smith, David, and Jeffrey S. Banks, “Cheap Talk and Burned Money,” Journal of Economic Theory, XCI (2000), 1–16.
Baum-Snow, Nathaniel, and Ronni Pavan, “Understanding the City Size Wage Gap,” Working Paper, Brown University and University of Rochester, 2009.
Berliant, Marcus, and Fan-Chin Kung, “Can Information Asymmetry Cause Agglomeration?” Working Paper, Washington University in St. Louis and City University of Hong Kong, 2008.
Berliant, Marcus, and Chia-Ming Yu, “Rational Expectations in Urban Economics,” Working Paper, Washington University in St. Louis, 2009.
Crawford, Vincent P., and Joel Sobel, “Strategic Information Transmission,” Econometrica, L (1982), 1431–1451.
Feldman, Maryann P., and David B. Audretsch, “Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition,” European Economic Review, XLIII (1999), 409–429.
Forslid, Rikard, and Gianmarco I.P. Ottaviano, “An Analytically Solvable Core-Periphery Model,” Journal of Economic Geography, III (2003), 229–240.
Fujita, Masahisa, and Jacques-Francois Thisse, Economics of Agglomeration: Cities, Industrial Location, and Regional Growth (Cambridge: Cambridge University Press, 2002).
Fukao, Kyoji, and Roland J. Benabou, “History versus Expectations: A Comment,” Quarterly Journal of Economics, CVIII (1993), 535–542.
Glaeser, Edward L., Hedi D. Kallal, Jose A. Scheinkman, and Andrei Shleifer, “Growth in Cities,” The Journal of Political Economy, C (1992), 1126–1152.
Glaeser, Edward L., and David Mare, “Cities and Skills,” The Journal of Labor Economics, XIX (2001), 316–342.
Grossman, Sanford J., “The Informational Role of Warranties and Private Disclosure about Product Quality,” Journal of Law and Economics, XXIV (1981), 461–483.
Henderson, J. Vernon, “Efficiency of Resource Usage and City Size,” Journal of Urban Economics, XIX (1986), 47–70.
Henderson, J. Vernon, Ari Kuncoro, and Matthew Turner, “Industrial Development in Cities,” Journal of Political Economy, CIII (1995), 1067–1090.
Gould, Eric, “Cities, Workers, and Wages: A Structural Analysis of the Urban Wage Premium,” Review of Economic Studies, LXXIV (2007), 477–506.
Krugman, Paul, “Increasing Returns and Economic Geography,” Journal of Political Economy, XCIX (1991a), 483–499.
Krugman, Paul, “History versus Expectations,” Quarterly Journal of Economics, CVI (1991b), 651–667.
Krugman, Paul, “The Increasing Returns Revolution in Trade and Geography,” American Economic Review, XCIX (2009), 561–571.
Rothschild, Michael, and Joseph E. Stiglitz, “Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information,” Quarterly Journal of Economics, XC (1976), 629–649.
Spence, A. Michael, “Job Market Signaling,” The Quarterly Journal of Economics, LXXXVII (1973), 355–374.
Starrett, David, “Market Allocations of Location Choice in a Model with Free Mobility,” Journal of Economic Theory, XVII (1978), 21–37.
U.S. Census Bureau, “1990 Population and Housing Unit Counts: United States,” 1990 Census of Population and Housing (Washington, D.C.: U.S. Census Bureau, 1990)
Wilson, Charles, “A Model of Insurance Markets with Incomplete Information,” Journal of Economic Theory, XVI (1977), 167–207.