Off-Shoring of Business Services and De-Industrialization: Threat or Opportunity - and for Whom?

This paper takes a new look at the issue of overseas sourcing of services. In framework in which comparative advantage is endogenous to agglomeration economies and factor mobility, the fragmentation of production made possible by the new communication technologies and low transportation costs allow global firms (multinational corporations or individual firms active in global networks) to simultaneously reap the benefit of agglomeration economies in OECD countries and of low wages prevailing in countries with an ever better educated labour force like India. Thus, the reduction of employment in some routine tasks in rich countries in a general equilibrium helps sustain and reinforces employment in the core competencies in such countries. That is, the loss of some jobs permits to retain the 'core competencies' in the 'core countries'. The welfare implications of this analysis are shown to be not as straightforward as in a neoclassical world.Outsourcing, wage inequality, communication costs

Homotopy morphisms between convolution homotopy Lie algebras

In previous works by the authors, a bifunctor was associated to any operadic twisting morphism, taking a coalgebra over a cooperad and an algebra over an operad, and giving back the space of (graded) linear maps between them endowed with a homotopy Lie algebra structure. We build on this result by using a more general notion of $\infty$-morphism between (co)algebras over a (co)operad associated to a twisting morphism, and show that this bifunctor can be extended to take such $\infty$-morphisms in either one of its two slots. We also provide a counterexample proving that it cannot be coherently extended to accept $\infty$-morphisms in both slots simultaneously. We apply this theory to rational models for mapping spaces.Comment: 37 pages; v2: minor typo corrections, updated bibliography, final versio

Convolution algebras and the deformation theory of infinity-morphisms

Given a coalgebra C over a cooperad, and an algebra A over an operad, it is often possible to define a natural homotopy Lie algebra structure on hom(C,A), the space of linear maps between them, called the convolution algebra of C and A. In the present article, we use convolution algebras to define the deformation complex for infinity-morphisms of algebras over operads and coalgebras over cooperads. We also complete the study of the compatibility between convolution algebras and infinity-morphisms of algebras and coalgebras. We prove that the convolution algebra bifunctor can be extended to a bifunctor that accepts infinity-morphisms in both slots and which is well defined up to homotopy, and we generalize and take a new point of view on some other already known results. This paper concludes a series of works by the two authors dealing with the investigation of convolution algebras.Comment: 17 pages, 1 figure; (v2): Expanded some proofs, corrected typos, updated references. Final versio

Owners of Developed Land versus Owners of Undeveloped Land: Why Land Use is More Constrained in the Bay Area than in Pittsburgh

We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints are interpreted as shadow taxes that increase the land rent of already developed plots and reduce the amount of new housing developments. In general equilibrium, locations with nicer amenities are more developed and, as a consequence, more regulated. We test our model predictions by geographically matching amenity, land use, and historical Census data to metropolitan area level survey data on regulatory restrictiveness. Following the predictions of the model, we use amenities as instrumental variables and demonstrate that metropolitan areas with better amenities are more developed and more tightly regulated than other areas. Consistent with theory, metropolitan areas that are more regulated also grow more slowly.Land use regulations, zoning, land ownership, housing supply

Survival of the Fittest in Cities: Agglomeration, Selection, and Polarisation

Empirical studies consistently report that labour productivity and TFP rise with city size. The reason is that cities attract the most productive agents, select the best of them, and make the selected ones even more productive via various agglomeration economies. This paper provides a microeconomically founded model of vertical city differentiation in which the latter two mechanisms (`agglomeration' and `selection') operate simultaneously. Our model is both rich and tractable enough to allow for a detailed investigation of when cities emerge, what determines their size, and how they interact through the channels of trade. We then uncover stylised facts and suggestive econometric evidence that are consistent with the most distinctive equilibrium features of our model. We show, in particular, that larger cities are both more productive and more unequal (`polarised'), that inter-city trade is associated with higher income inequalities, and that the proximity of large urban centres inhibits the development of nearby cities.entrepreneur heterogeneity, firm selection, agglomeration, income inequalities, urbanization, urban systems

Endogenous Regional Policy in a Model of Agglomeration

It is a widely observed fact that in many European countries, regions of low population density get subsidies that are not justified by their size. This paper throws some light on the effect of this phenomena on location of manufacturing activities. Considering a simple two-region economic geography model enriched to allow for endogenously determined regional policy, we find that, once the political economics of regional policy is explicitly considered, region size has an ambiguous effect in determining the equilibrium regional subsidy, while it still plays a key role in the determination of the equilibrium share of industrial activities. In particular the final allocation of firms will depend both on the relative economic strength of the two regions, as predicted by more orthodox economic geography models, and by their relative political weight.Agglomeration; Home Market Effect; Regional Aids; Political Economy; Swing Voter

Offshoring: General Equilibrium Effects on Wages, Production and Trade

A simple model of offshoring, which depicts offshoring as ‘shadow migration’, permits harsimonious derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations and to allow for monopolistic competition. We also show that, unlike trade in goods, trade in tasks typically makes all types of workers better off in both the host and home countries (with some proviso).

On the damped oscillations of an elastic quasi-circular membrane in a two-dimensional incompressible fluid

We propose a procedure - partly analytical and partly numerical - to find the frequency and the damping rate of the small-amplitude oscillations of a massless elastic capsule immersed in a two-dimensional viscous incompressible fluid. The unsteady Stokes equations for the stream function are decomposed onto normal modes for the angular and temporal variables, leading to a fourth-order linear ordinary differential equation in the radial variable. The forcing terms are dictated by the properties of the membrane, and result into jump conditions at the interface between the internal and external media. The equation can be solved numerically, and an excellent agreement is found with a fully-computational approach we developed in parallel. Comparisons are also shown with the results available in the scientific literature for drops, and a model based on the concept of embarked fluid is presented, which allows for a good representation of the results and a consistent interpretation of the underlying physics.Comment: in press on JF

Entry and Asymmetric Lobbying: Why Governments Pick Losers

Governments frequently intervene to support domestic industries, but a surprising amount of this support goes to ailing sectors. We explain this with a lobbying model that allows for entry and sunk costs. Specifically, policy is influenced by pressure groups that incur lobbying expenses to create rents. In expanding industries, entry tends to erode such rents, but in declining industries, sunk costs rule out entry as long as the rents are not too high. This asymmetric appropriability of rents means losers lobby harder. Thus it is not that government policy picks losers, it is that losers pick government policy.Lobbying, Sunset Industries, Sunk Costs