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The role of cities: evidence from the placement of sales offices

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Author Info
Thomas J. Holmes

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Abstract

What is the force of attraction of cities? Leading explanations include the advantages of a concentrated market and knowledge spillovers. This paper develops a model of firm location decisions in which it is possible to distinguish the importance of the concentrated-market motive from other motives, including knowledge spillovers. A key aspect of the model is that it allows for the firm to choose multiple locations. The theory is applied to study the placement of manufacturing sales offices. The implications of the concentrated-market motive are found to be a salient feature of U.S. Census micro data. The structural parameters of the model are estimated. The concentrated-market motive is found to account for approximately half of the concentration of sales offices in large cities.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 298.

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Date of creation: 2002
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Handle: RePEc:fip:fedmsr:298

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Keywords: Cities and towns ; Economies of scale;

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References listed on IDEAS
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.:
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  8. 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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  9. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," NBER Working Papers 3993, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April. [Downloadable!] (restricted)
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  14. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September. [Downloadable!] (restricted)
  15. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October. [Downloadable!] (restricted)
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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. Berry, Steven & Waldfogel, Joel, 2005. "Product Quality and Market Size," Working Papers 1, Yale University, Department of Economics. [Downloadable!]
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  2. Thomas J. Holmes, 2004. "Step-by-step Migrations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 52-68, January. [Downloadable!] (restricted)
  3. No, Angela, 2008. "Cities and Growth: Knowledge Spillovers in the Adoption of Advanced Manufacturing Technologies," The Canadian Economy in Transition 2008018e, Statistics Canada, Economic Analysis Division. [Downloadable!]
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