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Agglomeration, Vertical Specialization, and the Strength of Industrial Linkages

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  • Jan Kranich

    ()
    (Leuphana Universität Lüneburg)

Abstract

This paper picks up the seminal model of Venables (1996) and provides a quantifying concept for the sectoral coherence in vertical-linkage models of the New Economic Geography. Based upon an alternative approach to solve the model and to determine critical trade cost values, this paper focuses on the interdependencies between agglomeration, specialization and the strength of vertical linkages. A central concern is the idea of an ’industrial base,’ which is attracting linked industries but is persistent to relocation. As a main finding, the intermediate cost share and substitution elasticity basically determine the strength of linkages. Thus, these parameters affect how strong the industrial base responds to changes in trade costs, relative wages and market size.

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Bibliographic Info

Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 98.

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Length: 44 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:lue:wpaper:98

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Web page: http://leuphana.de/institute/ivwl.html

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Keywords: New Economic Geography; Vertical Linkages;

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  1. 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.
  2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  3. Ottaviano, Gianmarco I. P., 2002. "Regional policy in the global economy : insights from new economic geography," HWWA Discussion Papers 211, Hamburg Institute of International Economics (HWWA).
  4. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
  5. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  6. David Hummels & Dana Rapoport & Kei-Mu Yi, 1998. "Vertical specialization and the changing nature of world trade," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 79-99.
  7. J. Peter Neary, 2000. "Of Hype and Hyperbolas - Introducing the new Economic Geography," Working Papers 200019, School Of Economics, University College Dublin.
  8. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  9. repec:fth:iniesr:430 is not listed on IDEAS
  10. K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers 142, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  11. 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.
  12. Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 125-153, February.
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Cited by:
  1. Peng, Ling & Hong, Yongmiao, 2013. "Productivity spillovers among linked sectors," China Economic Review, Elsevier, vol. 25(C), pages 44-61.
  2. repec:wyi:journl:002193 is not listed on IDEAS

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