MIGRATION AND AGGLOMERATION WITH KNOWLEDGE SPILLOVERS

In this paper, a Grossman-Helpman-Romer-type endogenous growth model is developed that incorporates two regions and mobile workers. While the linkage between final goods firms and intermediate goods firms is strong, the linkage between innovation activities and manufacturing activities is weak in our paper. It is possible for the economy to reach either full agglomeration, partial agglomeration, or segmented agglomeration. We find that mobile workers acquire the highest welfare under full agglomeration. However, under segmented agglomeration, the welfare of skilled workers is not necessarily the lowest.