Effects of transportation barriers on geographic asymmetries in labour markets

Abstract

The main motivation of this paper is to derive testable predictions on how investments in transport infrastructure might influence spatial wage disparities and commuting flows in a region where a topographical barrier separates the geography into two areas. Wages and commuting flows result from a labour market equilibrium with duopsonistic wage-setting. The results provide important input both for the conduction of cost benefit assessments, and for a discussion of wider impacts of transport investments. The analysis distinguishes between alternative types of equilibrium solutions, according to the direction of commuting flows between central and peripheral areas of the region, and the analysis also derives the conditions under which each type of equilibrium solution will be realized.