TY  - JOUR
AU  - Benabou,Roland
TI  - Workings of a City: Location, Education, and Production
JF  - National Bureau of Economic Research Technical Working Paper Series
VL  - No. 113
PY  - 1991
Y2  - October 1991
UR  - http://www.nber.org/papers/t0113
L1  - http://www.nber.org/papers/t0113.pdf
N1  - Author contact info:
Roland Benabou
Department of Economics
and Woodrow Wilson School
Princeton University
Princeton, NJ 08544
Tel: 609/258-3672
Fax: 609/258-5533
E-Mail: rbenabou@princeton.edu
AB  - We examine the implications of local externalities in human capital investment for the size and composition of the productive labor force. The model links residential choice, skills acquisition, and production in a city composed of several communities. Peer effects induce self-segregation by occupation, whereas efficiency may require identical communities. Even when some asymmetry is optimal, equilibrium segregation can cause entire 'ghettos" to drop out of the labor force. Underemployment is more extensive. the easier it is for high-skill workers to isolate themselves from others. When perfect segregation is feasible, individual incentives to pursue it are self-defeating, and lead instead to a shutdown of the productive sector.
ER  -