DP3324 | Spatial Mismatch and Skill Accumulation

Publication Date


JEL Code(s)


Programme Area(s)


Increasing returns in matching between skilled workers and firms create a local thick-market externality when labour markets are geographically segmented. This generates an agglomeration force that can offset the dispersion force due to local competition in a segmented product market. When this is the case, only some regions specialize in high-skill productions while others are caught in a low-skill trap.