Model of monopolistic competition with heterogeneous labor

The paper presents a tool for modelling monopolistic competition markets, based on Dixit-Stiglitz ideology but taking into account heterogeneity at labor market. We analyse several modifications of a two-sector general equilibrium model. In the basic one with two levels of workers qualification their shares are determined endogenously on the base of comparison between the higher wage of the skilled worker and heterogeneous education costs, also taking into account the labor mobility between the manufacture and agriculture sector. The model is generalized for the case of continuous distribution of labor qualification. The impact of the model parameters (ratio of fixed and variable costs, market size, heterogeneity in productivity, elasticity of substitution, etc.) on the obtained equilibrium prices, quantities, wages, number and size of firms, social welfare is investigated.