Unions and Firms Agglomeration

peer reviewedEconomic geography models predict the agglomeration of manufacturing activies only if the workforce is mobile. Still, as the E.U.’s experience shows, core–periphery patterns exist even though the workforce is rather immobile. The paper provides a theoretical explanation for such core–periphery patterns through the effect that unions have on firms’ incentive to agglomerate in a region. The paper offers fully analytical results about location equilibria and some interesting welfare properties