Unions and Firms Agglomeration

Economic 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.