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Industry relocation, linkages and spillovers across the Baltic Sea: extending the footloose capital model


  • Ole Christiansen

    () (Carl von Ossietzky Universität Oldenburg)

  • Dirk H. Ehnts

    () (Carl von Ossietzky Universität Oldenburg)

  • Hans-Michael Trautwein

    () (Carl von Ossietzky Universität Oldenburg)


TStudying the recent relocation of manufacturing industries from the Nordic countries to the Baltic countries, this paper provides an empirical application of the footloose capital model, a framework for spatial analysis. The model is extended to include input-output linkages and FDI spillovers. It is calibrated and applied, industry by industry, to a 3x3 matrix of Baltic countries and Nordic countries and to the pairing of these blocs. Simulation results are compared with ‘real world’ data and discussed in regard to testability restrictions of the footloose capital model. Incorporation of vertical linkages and spillovers can improve the goodness of fit, but while the predicted direction of industry relocation is often correct, predicted levels are not.

Suggested Citation

  • Ole Christiansen & Dirk H. Ehnts & Hans-Michael Trautwein, 2010. "Industry relocation, linkages and spillovers across the Baltic Sea: extending the footloose capital model," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 10(1), pages 61-78, June.
  • Handle: RePEc:bic:journl:v:10:y:2010:i:1:p:61-78

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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Cosmos and the City
      by Dirk in econoblog101 on 2011-05-29 18:50:48

    More about this item


    new economic geography; footloose capital model; linkages; spillovers;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)


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