Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Transactions-Cost Theory of Agglomeration Economies


Author Info

  • Avner Greif
  • Andres Rodriguez-Clare


July 11, 1995 In contrast to recent work in Regional Economics which emphasizes the role of an industry's scale in generating agglomeration economies, this paper emphasizes the importance of an industry's composition, that is, the number of firms generating agglomeration economies. As most recent work in this area, we assume that production is characterized by the use of non-tradable intermediate goods produced with decreasing average costs. Concentration leads to competition for inputs among final good producers, and thus provides a governance structure that mitigates the commitment problem intrinsic in the relationship between the intermediate goods' suppliers and final good producers. Hence, the paper establishes a link between the number of firms in the industry in a particular region, variety of industry-specific inputs, production costs, transaction costs, and producers' profits. Furthermore, the paper demonstrates that the scale effect and the composition effect can re-enforce each other. The paper's theoretical framework is applied to examine the concentration of the automobile industry in Michigan.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by Stanford University, Department of Economics in its series Working Papers with number 95003.

as in new window
Date of creation: 11 Jul 1995
Date of revision:
Handle: RePEc:wop:stanec:95003

Contact details of provider:
Postal: Ralph Landau Economics Building, Stanford, CA 94305-6072
Phone: (650)-725-3266
Fax: (650)-725-5702
Web page:
More information through EDIRC

Related research



No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. de Fontenay, Catherine C., 2004. "The dual role of market power in the Big Push: from evidence to theory," Journal of Development Economics, Elsevier, vol. 75(1), pages 221-238, October.
  2. Catherine deFontenay, 2000. "Market Power and the Failure of the Big Push: Evidence and Theory," Econometric Society World Congress 2000 Contributed Papers 1269, Econometric Society.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:wop:stanec:95003. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.