Equilibrium Locations of Vertically Linked Industries

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Equilibrium Locations of Vertically Linked Industries

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Venables, Anthony J.

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Anthony J. Venables

Abstract

This paper considers the locational choice of firms in an upstream and a downstream industry. Both industries are imperfectly competitive, with firms subject to increasing returns. There are transport costs between the two locations. Depending on the level of these costs there may be a single equilibrium with production diversified between locations, or multiple equilibria, some of which involve agglomeration at a single location. Typically the forces for agglomeration are greatest at intermediate levels of transport costs. Reducing these costs from a high to an intermediate level will cause agglomeration and consequent divergence of economic structure and income levels; reducing them to a low level may cause the industries to operate in both locations, bringing convergence of structure and income.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 802.

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Date of creation: May 1993
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Handle: RePEc:cpr:ceprdp:802

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Other versions of this item:

Article
- Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
Paper
- A Venables, 1993. "Equilibrium Locations of Vertically Linked Industries," CEP Discussion Papers 0137, Centre for Economic Performance, LSE.

Find related papers by JEL classification:
F1 - International Economics - - Trade
F10 - International Economics - - Trade - - - General
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
R3 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location

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