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Footloose Capital, Educational Choice, and Wage Inequality

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  • Yoshifumi Kon

    (Utsunomiya Kyowa University)

Abstract

This study investigates wage inequality between high- and low-skilled workers in a two- region footloose capital model with endogenous educational choices. Firms’ location decisions are governed by two opposing forces: agglomeration force and dispersion force. Comparative statics are conducted regarding the transportation costs of the differentiated goods sector. When consumers’ preference for differentiated goods are weak relative to homogeneous goods, declining transportation costs push firms from the populous region to the peripheral. Furthermore, wage inequality in the core region shrinks, but expands in the peripheral region.

Suggested Citation

  • Yoshifumi Kon, 2022. "Footloose Capital, Educational Choice, and Wage Inequality," CIRJE F-Series CIRJE-F-1200, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2022cf1200
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2022/2022cf1200.pdf
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    References listed on IDEAS

    as
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