Acquisition of skills, labor subsidies, and agglomeration of firms

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    The paper develops an analytically solvable model of new economic geography in which agglomeration of firms is caused by workers' investment in the acquisition of skills. Skilled workers earn high wages and have a large demand for goods. Since firms are attracted towards the demand, they locate at proximity of skilled workers. More workers invest in the acquisition of skills when more firms ask for these skills. Consequently, partial or full agglomeration of firms may be the location equilibrium. We also show that a reduction in transport costs increases the regional governments' incentives to subsidize the acquisition of skills. © 2005 Elsevier Inc. All rights reserved.
    langue originaleAnglais
    Pages (de - à)420-439
    Nombre de pages20
    journalJournal of Urban Economics
    Les DOIs
    Etat de la publicationPublié - 1 mai 2006

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