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Economic Geography and Wages

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  • Mary Amiti

    (International Monetary Fund and CEPR)

  • Lisa Cameron

    (University of Melbourne)

Abstract

This paper estimates the agglomeration benefits that arise from vertical linkages between firms. We identify the agglomeration benefits off the spatial variation in firms' nominal wages. Using unusually detailed intermediate input data, we take account of the location of input suppliers to estimate cost linkages; and the location of demand from final consumers and other firms to estimate demand linkages. The results show that the externalities that arise from demand and cost linkages are quantitatively important and highly localized. An increase in either cost or demand linkages from the 10th to the 90th percentile increases wages by more than 20%. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 89 (2007)
Issue (Month): 1 (February)
Pages: 15-29

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Handle: RePEc:tpr:restat:v:89:y:2007:i:1:p:15-29

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  1. Amiti, Mary, 2005. "Location of vertically linked industries: agglomeration versus comparative advantage," European Economic Review, Elsevier, Elsevier, vol. 49(4), pages 809-832, May.
  2. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2568, C.E.P.R. Discussion Papers.
  3. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262561476, December.
  4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
  5. Guy Dumais & Glenn Ellison & Edward Glaeser, 1997. "Geographic Concentration as a Dynamic Process," NBER Working Papers 6270, National Bureau of Economic Research, Inc.
  6. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(4), pages 857-80, November.
  7. Mary Amiti, 1998. "Regional Specialisation and Technological Leapfrogging," Working Papers, School of Economics, La Trobe University 1998.14, School of Economics, La Trobe University.
  8. repec:fth:iniesr:430 is not listed on IDEAS
  9. Alatas, Vivi & Cameron, Lisa, 2003. "The impact of minimum wages on employment in a low income country : an evaluation using the difference-differences approach," Policy Research Working Paper Series, The World Bank 2985, The World Bank.
  10. Henderson, J Vernon & Kuncoro, Ari, 1996. "Industrial Centralization in Indonesia," World Bank Economic Review, World Bank Group, World Bank Group, vol. 10(3), pages 513-40, September.
  11. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, American Economic Association, vol. 72(3), pages 389-405, June.
  12. Nickell, S.J., 1993. "Competition and Crporate Performance," Economics Series Working Papers, University of Oxford, Department of Economics 99155, University of Oxford, Department of Economics.
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