Date of this Version
Regional Science and Urban Economics
When firms cluster in the same local labour market, they face a trade-off between the benefits of labour pooling (i.e., access to workers whose knowledge help reduce costs) and the costs of labour poaching (i.e., loss of some key workers to competition and a higher wage bill to retain the others). We explore this tradeoff in a duopoly game. Depending on market size, on the degree of horizontal differentiation between goods, and on worker heterogeneity in terms of knowledge transfer cost, we characterise the strategic choices of firms regarding locations, wages, poaching and prices. Our results show that co-location, although it is always efficient in our framework, is not in general the non-cooperative equilibrium outcome.
© 2006. This manuscript version is made available under the CC-BY-NC-ND 4.0 license
labour pooling, labour poaching, film clustering, agglomeration
Combes, P., & Duranton, G. (2006). Labour Pooling, Labour Poaching, and Spatial Clustering. Regional Science and Urban Economics, 36 (1), 1-28. http://dx.doi.org/10.1016/j.regsciurbeco.2005.06.003
Date Posted: 27 November 2017
This document has been peer reviewed.