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By Thiess Büttner

By technique of theoretical and empirical research agglomeration economies as localized returns to scale are confirmed because the easy resource of financial disparity. The principal implication for the exertions marketplace is the ensuing direction dependency of the spatial employment development. As an empirical research of migration inside of Germany files robust neighborhood segmentation within the brief run, neighborhood salary formation is of specific value for the adjustment approach in keeping with adjustments of the spatial employment trend. even though, a theoretical dialogue exhibits that during the German environment with centralized salary bargaining neighborhood wages has a tendency to be rigid. This view is supported by means of an empirical research of the spatial salary constitution in Germany utilizing district data.

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Extra resources for Agglomeration, Growth, and Adjustment: A Theoretical and Empirical Study of Regional Labor Markets in Germany

Sample text

26) for each regional allocatio n of the labor force. 2 shows solutions for different values of t'J , the transport costs on final products. T he lines depict the rea l-wage difference between region rand s for region rs share of total employment as given by the horizonta l axis. The elasticity of substit utio n between intermediat es and between final prod ucts is set equal (cp = 1]) . For simplicity, the transport costs on intermediate goods are assumed again to be prohibitive (r infinite) , and there is no direct labor input in the prod uct ion of the final good.

T herefore, all workers in t he city have the same cost of living in the urb an agglomera tion. Since each 21Cf. Beckm ann I Puu (1985), p. 204. 26 Employm ent in an Interr egional Equilibrium worker demands a fixed area for housing, average commuting time or land rent s increase with population. F Note th at the assumption of exogenous regional differences in the cost. of living, such as fixed regional amenit ies, is not sufficient to limit the agglomerativ e forces. But again , the scarcity of a region specific factor, land , introduces an element of diminishing returns.

In this subsect ion each of th ese cases is briefly considered. In the above tr eatment of increasing returns it was implicitly assumed th at th e area, within which agglomerati on economies are present , may carry an infinite density of pro duct ion with out affec ting productivity. If instead land is an input of produ ction , at some level of activity the influence of agglomeration economies is dominated by th e rest riction imposed from th e scarcity of spa ce. As Beckmann / Puu (1985) have put it: 16See also th e tr eatment of Arthur (1990).

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