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Vertical Disintegration in Marshallian Industrial Districts

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  • Octávio Figueiredo

    ()
    (Universidade do Porto and CEMPRE)

  • Paulo Guimarães

    ()
    (University of South Carolina and CEMPRE)

  • Douglas Woodward

    ()
    (University of South Carolina)

Abstract

This paper uses a novel measure and detailed plant-level Portuguese data to reexamine the Marshallian hypothesis that specialization and the vertical disintegration of firms should be greater in areas where an industry concentrates. Our measure of firm specialization and vertical disintegration employs a Herfindhal index constructed with occupational shares for all workers within the firm. Controlling for firm size and sector of activity, we find that vertical disintegration is around three percent higher in areas where industries agglomerate. Sensitivity tests reveal that this positive relation is remarkably robust across different specifications.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 280.

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Length: 23 pages.
Date of creation: Jun 2008
Date of revision:
Handle: RePEc:por:fepwps:280

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Keywords: Vertical Disintegration of Firms; Agglomeration; Localization Economies;

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References

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  1. Thomas J. Holmes, 1999. "Localization Of Industry And Vertical Disintegration," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 314-325, May.
  2. Ono, Yukako, 2007. "Market thickness and outsourcing services," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 220-238, March.
  3. Holl, Adelheid, 2008. "Production subcontracting and location," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 299-309, May.
  4. 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.
  5. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
  6. Yukako Ono, 2002. "Outsourcing business services and the role of central administrative offices," Working Paper Series WP-02-01, Federal Reserve Bank of Chicago.
  7. Wheeler, Christopher H., 2006. "Productivity and the geographic concentration of industry: The role of plant scale," Regional Science and Urban Economics, Elsevier, vol. 36(3), pages 313-330, May.
  8. Paulo Guimar�es & Octávio Figueiredo & Douglas Woodward, 2007. "Measuring The Localization Of Economic Activity: A Parametric Approach," Journal of Regional Science, Wiley Blackwell, vol. 47(4), pages 753-774.
  9. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  10. Paulo Guimarães & Octávio Figueiredo & Douglas Woodward, 2008. "Dartboard Tests for the Location Quotient," FEP Working Papers 273, Universidade do Porto, Faculdade de Economia do Porto.
  11. Octávio Figueiredo & Paulo Guimarães & Douglas Woodward, 2009. "Localization economies and establishment size: was Marshall right after all? -super-†," Journal of Economic Geography, Oxford University Press, vol. 9(6), pages 853-868, November.
  12. M. A. Adelman, 1955. "Concept and Statistical Measurement of Vertical Integration," NBER Chapters, in: Business Concentration and Price Policy, pages 281-330 National Bureau of Economic Research, Inc.
  13. Li, Ben & Lu, Yi, 2009. "Geographic concentration and vertical disintegration: Evidence from China," Journal of Urban Economics, Elsevier, vol. 65(3), pages 294-304, May.
  14. Marshall, Alfred, 1890. "The Principles of Economics," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number marshall1890.
  15. Gordon H. Hanson, 1994. "Localization Economies, Vertical Organization and Trade," NBER Working Papers 4744, National Bureau of Economic Research, Inc.
  16. Venables, Anthony J, 1996. "Localization of Industry and Trade Performance," Oxford Review of Economic Policy, Oxford University Press, vol. 12(3), pages 52-60, Autumn.
  17. Maddigan, Ruth J, 1981. "The Measurement of Vertical Integration," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 328-35, August.
  18. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  19. Eckard, E Woodrow, Jr, 1979. "A Note on the Empirical Measurement of Vertical Integration," Journal of Industrial Economics, Wiley Blackwell, vol. 28(1), pages 105-07, September.
  20. Smith, Adam, 1776. "An Inquiry into the Nature and Causes of the Wealth of Nations," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number smith1776.
  21. Thomas J. Holmes & John J. Stevens, 2002. "Geographic Concentration and Establishment Scale," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 682-690, November.
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Cited by:
  1. Isabel Diez-Vial & Emilio Alvarez-Suescun, 2010. "Geographical Agglomeration as an Alternative to Vertical Integration," Review of Industrial Organization, Springer, vol. 36(4), pages 373-389, June.
  2. Alexandre Almeida & Aurora A.C. Teixeira, 2008. "One size does not fit all… An economic development perspective on the asymmetric impact of Patents on R&D," FEP Working Papers 292, Universidade do Porto, Faculdade de Economia do Porto.

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