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Economic Geography and Wages

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Author Info
Mary Amiti (International Monetary Fund and CEPR)
Lisa Cameron (University of Melbourne)

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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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File URL: http://www.mitpressjournals.org/doi/pdfplus/10.1162/rest.89.1.15
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Publisher Info
Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 89 (2007)
Issue (Month): 1 (01)
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. Henderson, J Vernon & Kuncoro, Ari, 1996. "Industrial Centralization in Indonesia," World Bank Economic Review, Oxford University Press, vol. 10(3), pages 513-40, September.
  2. 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 2985, The World Bank. [Downloadable!]
  3. Amiti, M., 1998. "Regional Specialisation and Technological Leapfrogging," Papers 90-14, La Trobe - Department of Economics.
  4. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November. [Downloadable!] (restricted)
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  5. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June. [Downloadable!] (restricted)
  6. Guy Dumais & Glenn Ellison & Edward L. Glaeser, 2002. "Geographic Concentration As A Dynamic Process," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 193-204, May. [Downloadable!] (restricted)
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  7. Amiti, Mary, 2001. "Location of Vertically Linked Industries: Agglomeration versus Comparative Advantage," CEPR Discussion Papers 2800, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August. [Downloadable!] (restricted)
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  10. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  1. Redding, Stephen J & Sturm, Daniel M & Wolf, Nikolaus, 2007. "History and Industry Location: Evidence from German Airports," CEPR Discussion Papers 6345, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. John Romalis, 2007. "Market Access, Openness and Growth," NBER Working Papers 13048, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Russell Hillberry & David Hummels, 2005. "Trade Responses to Geographic Frictions: A Decomposition Using Micro-Data," NBER Working Papers 11339, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Ricardo Lopez & Jens Suedekum, 2007. "Vertical industry relations, spillovers and productivity: Evidence from Chilean plants," Caepr Working Papers 2007-016, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington. [Downloadable!]
    Other versions:
  5. Lall, Somik V. & Mengistae, Taye, 2005. "Business environment, clustering, and industry location : evidence from Indian cities," Policy Research Working Paper Series 3675, The World Bank. [Downloadable!]
  6. Dominique Peeters & Isabelle Thomas, 2005. "Does the Shape of a Territory Influence the Locations of Human Activities? a Numerical Geography Approach," ERSA conference papers ersa05p56, European Regional Science Association. [Downloadable!]
  7. Paul Courtney & Denis Lépicier & Bertrand Schmitt, 2005. "Rural firms, farms and the local economy - a focus on small and medium-sized towns," ERSA conference papers ersa05p128, European Regional Science Association. [Downloadable!]
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