DP2185 Integration, Agglomeration and the Political Economics of Factor Mobility

Author(s):	Gianmarco Ottaviano, Jacques-François Thisse
Publication Date:	July 1999
Keyword(s):	Agglomeration, Integration, Mobility, Political Economy
JEL(s):	F12, F22, R13, R38
Programme Areas:	Public Economics, International Trade and Regional Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=2185

This paper tackles the issue of the optimality of agglomeration in a two-region economy with skilled/mobile and unskilled/immobile workers. The market leads to the optimal outcome when transport costs are high or low. However, for intermediate values, it yields agglomeration whereas dispersion is socially desirable. We show that competitive lobbying on factor mobility by the two groups of workers sustains the second best optimum.