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Knowledge–capital meets new economic geography

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Author Info

  • Peter Egger

    ()

  • Stefan Gruber

    ()

  • Mario Larch

    ()

  • Michael Pfaffermayr

    ()

Abstract

We incorporate the now standard knowledge-capital model of multinational firms in a new economic geography setting. The theoretical predictions of our model suggest that unskilled labor mobility leads to less concentration of production than skilled labor mobility does. This is in line with empirical evidence that agglomeration of production among European nations is less pronounced than among US regions. Our model shows that the different patterns in labor mobility can explain actual differences in the spreading of industries. According to our welfare analysis, trade liberalization is likely Pareto-improving for a larger (smaller) country with mobile unskilled (skilled) labor. In the supplement, we investigate the sensitivity of our results in several respects. In the first section, we provide the figures of real factor rewards for the trade liberalization scenarios discussed in and underlying Figures 7 and 8 of the paper. Second, in Figures 3(n) - 5(v) (6(n) - 6b(v)) we infer the existence, or non-existence, of each firm type separately in the τ - λ L-space (τ - λ S-space) for country i firms and all four scenarios of firm regimes. Third, we illustrate how changes in the parameters μ, ρ and σ affect the outcome. Finally, we analyze how the asymmetric endowment with the immobile factor influences the core-periphery patterns.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s00168-007-0129-3
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Bibliographic Info

Article provided by Springer in its journal The Annals of Regional Science.

Volume (Year): 41 (2007)
Issue (Month): 4 (December)
Pages: 857-875

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Handle: RePEc:spr:anresc:v:41:y:2007:i:4:p:857-875

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Related research

Keywords: F12; F23; R12; R13;

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References

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  1. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, 01.
  2. Ekholm, Karolina & Forslid, Rikard, 2001. " Trade and Location with Horizontal and Vertical Multi-region Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 101-18, March.
  3. Constant, Amelie F. & Massey, Douglas S., 2003. "Labor Market Segmentation and the Earnings of German Guestworkers," IZA Discussion Papers 774, Institute for the Study of Labor (IZA).
  4. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
  5. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  6. Giorgio Barba Navaretti & Daniele Checchi & Alessandro Turrini, 2003. "Adjusting Labor Demand: Multinational Versus National Firms: A Cross-European Analysis," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 708-719, 04/05.
  7. Ottaviano, Gianmarco Ireo Paolo & Peri, Giovanni, 2005. "Rethinking the Gains from Immigration: Theory and Evidence from the US," CEPR Discussion Papers 5226, C.E.P.R. Discussion Papers.
  8. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
  9. Mary Amiti, 1997. "Specialisation Patterns in Europe," CEP Discussion Papers dp0363, Centre for Economic Performance, LSE.
  10. Raybaudi-Massilia, Marzia, 2000. "Economic Geography and Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 1-19, February.
  11. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  12. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
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Citations

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Cited by:
  1. Martin Gonzalez-Eiras & Dirk Niepelt, 2004. "Sustaining Social Security," 2004 Meeting Papers 199, Society for Economic Dynamics.
  2. Octavio Escobar, 2011. "The location pattern of FDI in Mexico after NAFTA," ERSA conference papers ersa10p804, European Regional Science Association.
  3. Escobar Gamboa, Octavio Romano, 2009. "IDE entrants, exportations et productivité manufacturière : les différentes performances des régions mexicaines," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/3850 edited by Guillochon, Bernard.
  4. Stefan Gruber, 2010. "To Migrate or to Commute?," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 2(1), pages 110-134, January.
  5. Escobar Gamboa, Octavio Romano, 2012. "Foreign direct investment (FDI) determinants and spatial spillovers across Mexico's states," Economics Papers from University Paris Dauphine 123456789/10605, Paris Dauphine University.

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