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Location and organization choice of firms

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  • Kenmei Tsubota

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    (Institute of Economic Research, Kyoto University)

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    Abstract

    We construct a two-region model of monopolistic competition with mobile entrepreneurs. Typical implicit assumption on increasing returns to scale sector is that firms can produce and sale only at one place. We explicitly introduce multi-plant case and examine location equilibrium with decreasing transpiration costs. The difference between single-plant and multi-plant firms lies in export-fixed cost and set-up fixed cost of multi-plant. We find that at certain transportation costs, firms change their organization type from multi-plant to single-plant and, with further decrease in transportation costs, firms concentrate in one region.

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    File URL: http://www.kier.kyoto-u.ac.jp/DP/DP679.pdf
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    Bibliographic Info

    Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 679.

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    Length: 19pages
    Date of creation: Aug 2009
    Date of revision:
    Handle: RePEc:kyo:wpaper:679

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    Related research

    Keywords: Economic Integration; Organization of Production; Horizontal FDI; Export Fixed Cost; Transaction Cost;

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    1. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1015, C.E.P.R. Discussion Papers.
    2. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, Oxford University Press, vol. 3(3), pages 229-240, July.
    3. BEHRENS, Kristian & PICARD, Pierre M., . "Welfare, home market effects, and horizontal foreign direct investment," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -2045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Toulemonde, Eric, 2007. "Home Market Effect versus Multinationals," IZA Discussion Papers 2829, Institute for the Study of Labor (IZA).
    5. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    6. repec:fth:iniesr:430 is not listed on IDEAS
    7. Raybaudi-Massilia, Marzia, 2000. "Economic Geography and Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 1-19, February.
    8. TOULEMONDE, Eric, . "Multinationals: Too many or too few? The proximity-concentration trade-off," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -2044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Ekholm, Karolina & Forslid, Rikard, 2001. " Trade and Location with Horizontal and Vertical Multi-region Firms," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 103(1), pages 101-18, March.
    10. James R. Markusen & Anthony J. Venables, 1995. "Multinational Firms and The New Trade Theory," NBER Working Papers 5036, National Bureau of Economic Research, Inc.
    11. Puga, Diego & Venables, Anthony J, 1999. "Agglomeration and Economic Development: Import Substitution vs. Trade Liberalisation," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 109(455), pages 292-311, April.
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