Does Technological Progress Magnify Regional Disparities?

Discussion Papers

No.599

by Takatoshi Tabuchi, Jacques-François Thisse and Xiwei Zhu

May 2016

ABSTRACT

We study how technological progress in manufacturing and transportation to-gether with migration costs interact to shape the space-economy. Rising labor productivity in the manufacturing sector fosters the agglomeration of activities, whereas falling transport costs associated with technological and organizational in-novations fosters their dispersion. Since these two forces have been at work for a long time, the final outcome must depend on how drops in the costs of producing and trading goods interact with the various costs borne by migrants. Finally, when labor is heterogeneous, the most efficient workers of the less productive region are the first to move to the more productive region.

Keywords: new economic geography, technological progress, labor productivity, migration costs, labor heterogeneity
JEL classification: J61, R12

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