published in: Journal of Urban Economics, 2006, 59 (3), 420-439
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, firms spread more or less evenly between regions, their precise location
being determined by the level of education subsidies. For low transport costs, firms
agglomerate in one region. We also identify equilibria with partial agglomeration of firms.
Finally, we show that the incentives to subsidy education largely depend on the level of
transport costs.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.