Economy vs. History: What Does Actually Determine the Distribution of Firms' Locations in Cities?
AbstractThe aim of this study is to examine in which cases economic forces or historical singularities prevail in the determination of the long-run distribution of firms. We develop a relatively general model of heterogenous firms' location choice in discrete space. The main force towards an agglomerated structure is the reduction of transaction costs for consumers if firms are located closely, whilst competition and transport costs work towards a more disperse structure. We then assess the importance of the initial conditions by simulating and comparing the resulting distribution of firms for identical economic parameters but varying initial settings. If the equilibrium distributions of firms are similar we conclude that economic forces have prevailed, while differences in the resulting distributions indicate that 'history' is more important. The (dis)similarity of distributions of firms is calculated by means of a measure, which exhibits a number of desirable features.
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Bibliographic InfoPaper provided by Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät in its series Volkswirtschaftliche Diskussionsbeiträge with number 67.
Date of creation: Jun 2004
Date of revision: Sep 2004
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Firm location choice; Discrete space; Path dependency;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-07 (All new papers)
- NEP-GEO-2004-06-07 (Economic Geography)
- NEP-HIS-2004-06-07 (Business, Economic & Financial History)
- NEP-URE-2004-06-07 (Urban & Real Estate Economics)
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