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Input-output linkages, proximity to final demand and the location of manufacturing industries

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  • MION, Giordano

Abstract

In this paper I develop an empirical framework to estimate the role of agglomeration externalities, especially those stemming from input-output linkages, in the location process of US manufacturing plants. Furthermore, drawing on the model of Holmesand Stevens (2004b), I propose a way to reconciliate some previous puzzling results about proximity to consumers' demand and the scope of agglomeration forces. Results suggest that intermediate flows have a positive impact, especially for big plants, on local specialization. By contrast, consumers' demand has a negative effect and this result is consistent with the model of Holmes and Stevens (2004b). However, the majority of both effects comes from very local interactions, with spatial spill-oversbeing quite weak, but with a very large geographical scope. This result suggests some kind of strong non-linearity in the underlying spatial process. While, very close interactions are extremely important, when considering what is beyond the limit of local markets then distance does not matter so much.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004053.

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Date of creation: 00 Jul 2004
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Handle: RePEc:cor:louvco:2004053

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Related research

Keywords: manufacturing concentration; input-output linkages; agglomeration externalities; market proximity;

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References

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  1. Russell Hillberry & David Hummels, 2002. "Explaining Home Bias in Consumption: The Role of Intermediate Input Trade," NBER Working Papers 9020, National Bureau of Economic Research, Inc.
  2. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
  3. Henderson, J. Vernon, 2003. "Marshall's scale economies," Journal of Urban Economics, Elsevier, vol. 53(1), pages 1-28, January.
  4. Combes, Pierre-Philippe, 2000. "Economic Structure and Local Growth: France, 1984-1993," Journal of Urban Economics, Elsevier, vol. 47(3), pages 329-355, May.
  5. Mary Amiti & Lisa Ann Cameron, 2004. "Economic Geography and Wages," IMF Working Papers 04/79, International Monetary Fund.
  6. 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.
  7. Thomas J. Holmes & John J. Stevens, 2002. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Finance and Economics Discussion Series 2002-17, Board of Governors of the Federal Reserve System (U.S.).
  8. LAFOURCADE, Miren & MION, Giordano, 2003. "Concentration, spatial clustering and the size of plants : disentangling the sources of co-location externalities," CORE Discussion Papers 2003091, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 377-393, May.
  10. Donald R. Davis & David E. Weinstein, 1997. "Economic Geography and Reginal Production Structure: An Empirical Investigation," NBER Working Papers 6093, National Bureau of Economic Research, Inc.
  11. Diego Puga, 1996. "The Rise and Fall of Regional Inequalities," CEP Discussion Papers dp0314, Centre for Economic Performance, LSE.
  12. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  13. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, vol. 89(2), pages 311-316, May.
  14. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July.
  15. Gordon H. Hanson, 1998. "Market Potential, Increasing Returns, and Geographic Concentration," NBER Working Papers 6429, National Bureau of Economic Research, Inc.
  16. Holmes, Thomas J. & Stevens, John J., 2004. "Spatial distribution of economic activities in North America," 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 63, pages 2797-2843 Elsevier.
  17. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
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Cited by:
  1. 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.

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