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Locational Signaling and Agglomeration (2010)
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BibTeX
@MISC{Berliant10locationalsignaling,
author = {Marcus Berliant and Chia-ming Yu},
title = {Locational Signaling and Agglomeration},
year = {2010}
}
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Abstract
Abstract: Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their pro-ductivity to potential employers. The cost of a signal is the cost of housing at that location. When workers ’ marginal willingness to pay for housing is negatively correlated with their productivity, only the core-periphery (par-tially stratified) equilibria are stable. When workers ’ marginal willingness to pay for housing and their productivity are positively correlated, there is no core-periphery equilibrium. Location can at best be an approximate rather than a precise sieve for high-skill workers. (JEL Classifications: D51; D82; R13)
