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Economic Geography and Wages

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Author Info
Amiti, Mary
Cameron, Lisa

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Abstract

This Paper estimates the agglomeration benefits that arise from vertical linkages between firms. The analysis is based on international trade and economic geography theory developed by Krugman and Venables (1995). We identify the agglomeration benefits of the spatial variation in firm level nominal wages. Unusually detailed intermediate input data allow us to capture more accurately spatial input/output linkages than in previous studies. 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 understanding of the extent and strength of spatial linkages is crucial in shaping policies that seek to influence regional development.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4234.

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Date of creation: Feb 2004
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Handle: RePEc:cpr:ceprdp:4234

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Related research
Keywords: agglomeration; economic geography; vertical linkages;

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
R10 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  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)
    Other versions:
  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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  11. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pflüger, Michael P. & Tabuchi, Takatoshi, 2008. "Trade and Location with Land as a Productive Factor," IZA Discussion Papers 3716, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Duranton, Gilles, 2008. "From Cities to Productivity and Growth in Developing Countries," CEPR Discussion Papers 6634, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Åkerman, Anders & Forslid, Rikard, 2009. "Firm Heterogeneity and Country Size Dependent Market Entry Cost," Working Paper Series 790, Research Institute of Industrial Economics. [Downloadable!]
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  4. Stephen Redding, 2009. "The Empirics of New Economic Geography," CEP Discussion Papers dp0925, Centre for Economic Performance, LSE. [Downloadable!]
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  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. 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!]
  7. MION, Giordano, 2004. "Input-output linkages, proximity to final demand and the location of manufacturing industries," CORE Discussion Papers 2004053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  8. 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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  9. John Romalis, 2007. "Market Access, Openness and Growth," NBER Working Papers 13048, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Diego Puga, 2009. "The magnitude and causes of agglomeration economies," Working Papers 2009-09, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales. [Downloadable!]
  11. Maarten Bosker & Harry Garretsen, 2008. "Economic Geography and Economic Development in Sub-Saharan Africa," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  12. Stephen Redding, 2009. "Economic Geography: A Review of the Theoretical and Empirical Literature," CEP Discussion Papers dp0904, Centre for Economic Performance, LSE. [Downloadable!]
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  13. 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)
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  14. Antonelli Cristiano & Patrucco Pierpaolo & Quatraro Francesco, 2008. "Pecuniary Knowledge Externalities: Evidence from European Regions," Dipartimento di Economia "S. Cognetti de Martiis" LEI & BRICK - Laboratorio di economia dell'innovazione "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio Carlo 200803, University of Turin. [Downloadable!]
  15. 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!]
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  16. Mary Amiti & Christopher A. Pissarides, 2004. "Trade and Industrial Location with Heterogeneous Labor," IMF Working Papers 04/103, International Monetary Fund. [Downloadable!]
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  17. Halfdanarson, Benedikt & Heuermann, Daniel F. & Suedekum, Jens, 2008. "Human Capital Externalities and the Urban Wage Premium: Two Literatures and their Interrelations," IZA Discussion Papers 3493, Institute for the Study of Labor (IZA). [Downloadable!]
  18. 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!]
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