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Regional Market Potential and the Number and Size of Firms: Observations and Evidence from Chile

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  • F�lix Modrego
  • Philip McCann
  • William E. Foster
  • M. Rose Olfert

Abstract

This paper investigates the relationship between market potential and the spatial variation in the number and the average size of firms. We adapt the canonical model of the New Economic Geography to demonstrate this relationship and to derive an empirical specification suitable for estimation through dynamic panel techniques. The model is tested against municipal data on the number of firms per adult in Chilean comunas for 2005-2010. Our results confirm that market potential along with place-specific fixed costs play an important role in determining the spatial variation in the number of firms per capita.

Suggested Citation

  • F�lix Modrego & Philip McCann & William E. Foster & M. Rose Olfert, 2014. "Regional Market Potential and the Number and Size of Firms: Observations and Evidence from Chile," Spatial Economic Analysis, Taylor & Francis Journals, vol. 9(3), pages 327-348, September.
    • Handle: RePEc:taf:specan:v:9:y:2014:i:3:p:327-348
    DOI: 10.1080/17421772.2014.930165
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    Cited by:

    1. Raquel Ortega-Argilés, 2022. "The evolution of regional entrepreneurship policies: “no one size fits all”," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 69(3), pages 585-610, December.
    2. Mauricio Oyarzo & Gianni Romani & Miguel Atienza & Marcelo Lufin, 2015. "Spatio-temporal persistence of municipal rates of business start-ups in Chile," Documentos de Trabajo en Economia y Ciencia Regional 61, Universidad Catolica del Norte, Chile, Department of Economics, revised Jul 2015.
    3. Foster, W., 2018. "Stability of the Ricardian land value model: Chile during rapid economic growth," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277125, International Association of Agricultural Economists.

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