A CORE-PERIPHERY MODEL WITH A KNOWLEDGE TRANSFER MECHANISM

Abstract

It is getting more and more important that skilled labors pass down their knowledge to the younger generations under declining population. We construct a Core-Periphery model in which young labors migrate between cities aiming at learning from skilled labors. The analysis of the model reveals that decrease in young generations increases each young labor's chances of learning through urban agglomeration. Furthermore, we demonstrate that the preferential tax policy for young labors has a disastrous effect that leads to the death of the city while the opposite policy is effective for growth of population in the city.