IDEAS home Printed from https://ideas.repec.org/a/bla/jregsc/v55y2015i4p540-559.html
   My bibliography  Save this article

Firm Heterogeneity, Multiplant Choice, And Agglomeration

Author

Listed:
  • Hisamitsu Saito

Abstract

We examine the organization and location choice of heterogeneous firms in a two‐region economy. When some high‐productivity firms engage in multiplant production, a reduction in transport costs causes two changes in a small region: the closure of plants by high‐productivity multiplant firms and the relocation of low‐productivity single‐plant firms to the region. In the presence of high‐productivity multiplant firms, therefore, a decline in transport costs reinforces the spatial sorting of firms by productivity, enlarging the productivity gap between large and small regions. Conversely, reducing investment costs weakens the spatial sorting effects on regional productivity disparities.

Suggested Citation

  • Hisamitsu Saito, 2015. "Firm Heterogeneity, Multiplant Choice, And Agglomeration," Journal of Regional Science, Wiley Blackwell, vol. 55(4), pages 540-559, September.
    • Handle: RePEc:bla:jregsc:v:55:y:2015:i:4:p:540-559
    DOI: 10.1111/jors.12163
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/jors.12163
    Download Restriction: no
    File URL: https://libkey.io/10.1111/jors.12163?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kristian Behrens & Pierre M. Picard, 2007. "Welfare, home market effects, and horizontal foreign direct investment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(4), pages 1118-1148, November.
    2. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-544, September.
    3. James R. Markusen & Anthony J. Venables, 2021. "The theory of endowment, intra-industry and multi-national trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 4, pages 69-94, World Scientific Publishing Co. Pte. Ltd..
    4. Pierre‐Philippe Combes & Gilles Duranton & Laurent Gobillon & Diego Puga & Sébastien Roux, 2012. "The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection," Econometrica, Econometric Society, vol. 80(6), pages 2543-2594, November.
    5. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    6. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Firms in the European Union," Sciences Po publications info:hdl:2441/10192, Sciences Po.
    7. Chen, Maggie Xiaoyang & Moore, Michael O., 2010. "Location decision of heterogeneous multinational firms," Journal of International Economics, Elsevier, vol. 80(2), pages 188-199, March.
    8. Volker Nocke, 2006. "A Gap for Me: Entrepreneurs and Entry," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 929-956, September.
    9. Diego Puga, 2010. "The Magnitude And Causes Of Agglomeration Economies," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 203-219, February.
    10. Koen De Backer & Leo Sleuwaegen, 2003. "Does Foreign Direct Investment Crowd Out Domestic Entrepreneurship?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(1), pages 67-84, February.
    11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    12. Okubo, Toshihiro & Picard, Pierre M. & Thisse, Jacques-François, 2010. "The spatial selection of heterogeneous firms," Journal of International Economics, Elsevier, vol. 82(2), pages 230-237, November.
    13. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
    14. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
    15. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    16. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
    17. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity (DOI:10.111/j.1467-937x.2007.00463.x)," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 985-985.
    18. James R. MARKUSEN, 2021. "Multinationals, Multi-Plant Economies, And The Gains From Trade," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    19. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
    20. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, vol. 94(1), pages 300-316, March.
    21. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    22. Henderson, J. Vernon, 2003. "Marshall's scale economies," Journal of Urban Economics, Elsevier, vol. 53(1), pages 1-28, January.
    23. I.P. Ottaviano, Gianmarco, 2008. "Infrastructure and economic geography: An overview of theory and evidence," EIB Papers 6/2008, European Investment Bank, Economics Department.
    24. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
    25. Toshihiro Okubo, 2012. "Antiagglomeration Subsidies With Heterogeneous Firms," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 285-299, May.
    26. Hisamitsu Saito & Munisamy Gopinath, 2009. "Plants' self-selection, agglomeration economies and regional productivity in Chile," Journal of Economic Geography, Oxford University Press, vol. 9(4), pages 539-558, July.
    27. Hisamitsu Saito & Munisamy Gopinath & JunJie Wu, 2011. "Heterogeneous firms, trade liberalization and agglomeration," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 541-560, May.
    28. Steven Poelhekke & Frederick Van Der Ploeg, 2009. "Foreign Direct Investment And Urban Concentrations: Unbundling Spatial Lags," Journal of Regional Science, Wiley Blackwell, vol. 49(4), pages 749-775, October.
    29. Nakamura, Ryohei, 1985. "Agglomeration economies in urban manufacturing industries: A case of Japanese cities," Journal of Urban Economics, Elsevier, vol. 17(1), pages 108-124, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yiming Zhou, 2020. "Urban agglomeration and heterogeneous firms: a synthesis of Helpman and Melitz," Journal of Economics, Springer, vol. 130(3), pages 275-296, August.
    2. Hangtian Xu & Yiming Zhou, 2023. "Inter-industry trade and heterogeneous firms: country size matters," The Japanese Economic Review, Springer, vol. 74(1), pages 57-81, January.
    3. OKUBO Toshihiro & TOMIURA Eiichi, 2016. "Multi-plant Operation and Corporate Headquarters Separation: Evidence from Japanese plant-level panel data," Discussion papers 16002, Research Institute of Economy, Trade and Industry (RIETI).
    4. Zhou, Yiming & Xu, Hangtian, 2019. "Inter-industry trade and heterogeneous firms: Country size matters," MPRA Paper 94746, University Library of Munich, Germany.
    5. Yiming Zhou, 2020. "Heterogeneous firms, urban costs and agglomeration," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(3), pages 329-348, September.
    6. Okubo, Toshihiro & Tomiura, Eiichi, 2016. "Multi-plant operation and headquarters separation: Evidence from Japanese plant-level panel data," Japan and the World Economy, Elsevier, vol. 39(C), pages 12-22.
    7. Toshihiro Okubo & Eiichi Tomiura, 2016. "Multi-plant operation and corporate headquarters separation: Evidence from Japanese plant-level," Keio-IES Discussion Paper Series 2016-016, Institute for Economics Studies, Keio University.
    8. Amendolagine, Vito & Crescenzi, Riccardo & Rabellotti, Roberta, 2022. "The geography of acquisitions and greenfield investments: firm heterogeneity and regional institutional conditions," LSE Research Online Documents on Economics 115597, London School of Economics and Political Science, LSE Library.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Forslid, Rikard & Okubo, Toshihiro, 2017. "Early agglomeration or late agglomeration?: Two phases of development with spatial sorting," CEPR Discussion Papers 11977, C.E.P.R. Discussion Papers.
    2. Forslid, Rikard & Okubo, Toshihiro, 2012. "On the development strategy of countries of intermediate size—An analysis of heterogeneous firms in a multi-region framework," European Economic Review, Elsevier, vol. 56(4), pages 747-756.
    3. Daguo Lv & Lingyu Zhang & Ren Lu & Jingtao Yao, 2022. "Industry characteristics and agglomeration of heterogeneous firms," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(1), pages 31-49, March.
    4. Saito, Hisamitsu, 2018. "Foreign multinationals, selection of local firms, and regional productivity in Indonesia," MPRA Paper 85158, University Library of Munich, Germany.
    5. Forslid, Rikard & Okubo, Toshihiro, 2014. "Spatial sorting with heterogeneous firms and heterogeneous sectors," Regional Science and Urban Economics, Elsevier, vol. 46(C), pages 42-56.
    6. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.
    7. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    8. Békés, Gábor & Harasztosi, Péter, 2013. "Agglomeration premium and trading activity of firms," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 51-64.
    9. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 171-245, Elsevier.
    10. Ana Gouveia & Sílvia Santos & Marli Fernandes, 2017. "The empirics of agglomeration economies: the link with productivity," GEE Papers 0067, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Feb 2017.
    11. Anders Akerman & Rikard Forslid, 2009. "Firm Heterogeneity and Country Size Dependent Market Entry Costs," Global COE Hi-Stat Discussion Paper Series gd09-056, Institute of Economic Research, Hitotsubashi University.
    12. Chen, Maggie Xiaoyang & Moore, Michael O., 2010. "Location decision of heterogeneous multinational firms," Journal of International Economics, Elsevier, vol. 80(2), pages 188-199, March.
    13. Okubo, Toshihiro & Picard, Pierre M. & Thisse, Jacques-François, 2010. "The spatial selection of heterogeneous firms," Journal of International Economics, Elsevier, vol. 82(2), pages 230-237, November.
    14. Pierre‐Philippe Combes & Gilles Duranton & Laurent Gobillon & Diego Puga & Sébastien Roux, 2012. "The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection," Econometrica, Econometric Society, vol. 80(6), pages 2543-2594, November.
    15. Ottaviano, Gianmarco I.P., 2012. "Agglomeration, trade and selection," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 987-997.
    16. Hisamitsu Saito & Munisamy Gopinath & JunJie Wu, 2011. "Heterogeneous firms, trade liberalization and agglomeration," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(2), pages 541-560, May.
    17. Antonio Accetturo & Valter Di Giacinto & Giacinto Micucci & Marcello Pagnini, 2018. "Geography, productivity, and trade: Does selection explain why some locations are more productive than others?," Journal of Regional Science, Wiley Blackwell, vol. 58(5), pages 949-979, November.
    18. OKUBO Toshihiro & Rikard FORSLID, 2010. "Spatial Relocation with Heterogeneous Firms and Heterogeneous Sectors," Discussion papers 10056, Research Institute of Economy, Trade and Industry (RIETI).
    19. KONDO Keisuke & OKUBO Toshihiro, 2020. "The Impact of Market Size on Firm Selection," Discussion papers 20053, Research Institute of Economy, Trade and Industry (RIETI).
    20. repec:esx:essedp:729 is not listed on IDEAS
    21. Okubo, Toshihiro, 2009. "Trade liberalisation and agglomeration with firm heterogeneity: Forward and backward linkages," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 530-541, September.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jregsc:v:55:y:2015:i:4:p:540-559. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0022-4146 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.