Citation Amend E & Herbst P (2009) Labor Market Pooling and Human Capital Investment Decisions. SSRN Working Paper Series. http://ssrn.com/abstract=1479393
Abstract Labor market pooling is considered one of the advantages of agglomerations. This paper presents a model of human capital formation in an imperfectly competitive, pooled local labor market with heterogeneous workers and firms. Firms produce with different technologies requiring diverse skills. Workers specialize into specific skills and accumulate general human capital. While labor market pooling provides static efficiency gains, our results also imply positive long-term effects: Under a diversified structure, firm-specific shocks increase workers' incentives to acquire both general and specific human capital. This not only raises productivity but also strengthens a region's capability to adapt to change.
Keywords Human capital; labor market pooling; agglomeration economies; unemployment
I20: Education and Research Institutions: General
J24: Human Capital; Skills; Occupational Choice; Labor Productivity