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Agglomeration in a Core-Periphery Model with Vertically and Horizontally Integrated Firms

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  • Ekholm, Karolina
  • Forslid, Rikard

Abstract

This paper analyses the effect of allowing for a more general production structure in the core-periphery (CP) model. Two special cases of fully horizontally- and vertically-integrated firms are treated. The case of horizontally-integrated firms is a counter-example to the strong agglomeration effects found in the CP model. A symmetric equilibrium will always be stable and hence agglomeration is prevented. The introduction of vertically-integrated firms that can separate the location of headquarter activities from the location of production, has two effects. First, it tends to break the symmetry of the original CP model and thus lead to more agglomeration. Second, it also tends to decrease the parameter space in which full agglomeration occurs, and therefore leads to less agglomeration.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1607.

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Date of creation: Mar 1997
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Handle: RePEc:cpr:ceprdp:1607

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Related research

Keywords: Agglomeration; Economic Geography; Horizontally Integrated Firms; Vertically Integrated Firms;

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Cited by:
  1. Nestor Duch Brown, 2006. "The empirics of spatial competition: Evidence from European regions," Working Papers in Economics 150, Universitat de Barcelona. Espai de Recerca en Economia.
  2. Marano, Angelo, 2000. "Beyond The London-Frankfurt Dichothomy. What Space For The Other European Financial Centers?," ERSA conference papers ersa00p407, European Regional Science Association.
  3. José Pedro Pontes, 2001. "Location of foreign direct investment in a regional integration area," Economics Bulletin, AccessEcon, vol. 18(5), pages 1-9.

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