This paper investigates the impact of labor markets and economies of agglomeration on firms location. We show that the existence of a lower bound on wage (e.g. a minimum wage or a reservation wage) introduces asymmetric location of firms. Moreover, changes in that lower bound or in global...

An analytically solvable model of new economic geography is developed. Acquisition of skills is costly for workers but it allows them to earn wages that are larger than those of the unskilled. Moreover, skills acquisition can be subsidized by a regional government. For large transport costs,...

We develop a model with two asymmetric countries. Firms choose the number and the location of plants that they operate. The production of each firm increases when trade costs fall. The fall also induces multinationals to repatriate their production into a single country, which is likely to be...

Recent empirical contributions in labor economics suggest that individual firms face upward sloping labor supplies. We rationalize this by assuming that idiosyncratic non-pecuniary conditions interact with money wages in workers’ decisions to work for specific firms. Likewise, firms supply...

Economic regions, such as urban agglomerations, face external demand and price shocks that produce income risk. Workers in large and diversified agglomerations may benefit from reduced wage volatility, while firms may outsource the production of intermediate goods and realize benefits from...

This paper studies the costs and benefits of the adoption of the policy of free movement for workers. For the countries to agree on uncontrolled movement of workers, the short run costs must be outweighed by the long term benefits that result from better labor market flexibility and income...