Space economy is determined by the interaction between markets and the mobility of production factors. Capital and labor mobility affects the functioning of the product and labor markets in the regions of origin and destination. This feeds back into the earnings of production factor owners and changes the incentives to move through the modification of demand levels in both regions. In this paper, we build a model with two regions and two production factors, labor and capital, à la Tabuchi-Helpman in order to embody both capital and labor mobility in a unique model. Considering the conditions for agglomeration and dispersion to arise, we show that the features of the labor market are a key parameter along with well-known trade costs. The results show that, depending on labor market conditions, the industry and the population display a smooth bell-shaped curve of spatial development. Dispersion prevails when trade costs are either high or low, while agglomeration occurs in between. Market integration and factor mobility exacerbate regional disparities.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.The Review of Regional Studies is an open journal, and uses the standard Creative Commons license: Copyright We want authors to retain the maximum control over their work consistent with the first goal. For this reason, authors who publish in The Review of Regional Studies will release their articles under the
Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given to The Review of Regional Studies and the authors. Upon submission, the authors agree that the following three items are true: 1) The manuscript named above: a) represents valid work and neither it nor any other that I have written with substantially similar content has been published before in any form except as a preprint, b) is not concurrently submitted to another publication, and c) does not infringe anyone’s copyright. The Author(s) holds the Southern Regional Science Association, The Review of Regional Studies, and the Editors of The Review of Regional Studies harmless against all copyright claims. d) I have, or a coauthor has, had sufficient access to the data to verify the manuscript’s scientific integrity. 2) If asked, I will provide or fully cooperate in providing the data on which the manuscript is based so the editors or their assignees can examine it (where possible) 3) For papers with more than one author, I as the submitter have the permission of the coauthors to submit this work, and all authors agree that the the corresponding author will be the main correspondent with the editorial office, and review the edited manuscript and proof. If there is only one author, I will be the corresponding author and agree to handle these responsibilities.