Employment in an Interregional Equilibrium

Abstract

This chapter deals with an interregional equilibrium characterizing a regional allocation of activities in which no agent has an incentive to change the location of its activity. This allows the determination of the conditions, under which employment is observed in a specific region when both employers and employees are fully mobile. This general perspective on the regional dimension of the labor market will provide basic insights into the role of agglomeration economies as a cause of regional disparity. The interregional setting is necessary because agglomeration economies build on the interdependence of location decisions. Basically, the set of possible determinants of the regional allocation of activities can be distinguished into two large groups, one is specific to the regions and exogenous to the interregional equilibrium, the other is subject to the agents’ location decisions and therefore endogenous. It seems straightforward to model the location decisions and then derive the interregional equilibrium from the first group. But, if there are agglomeration economies, location decisions may become interdependent in a way which has strong consequences for the regional equilibrium.KeywordsWage RateTransport CostKnowledge SpilloverFinal GoodIntermediate GoodThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.