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Fragmentation And Clustering In Vertically Linked Industries

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  • Joana Pais
  • José Pedro Pontes

Abstract

ABSTRACT This paper models the location of two vertically related firms in a low labor cost country and in a country with a large market. The upstream industry is more labor intensive than the downstream industry. We find that spatial fragmentation occurs for low values of the input‐output coefficient and intermediate values of the transport rate, particularly if the countries are very asymmetric in size. Otherwise, we obtain agglomeration either in the low cost country (when the transport rate is low) or in the large market (when the transport rate is high). Multiple agglomerated equilibria arise when the transport cost of the intermediate good is significant.

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  • Joana Pais & José Pedro Pontes, 2008. "Fragmentation And Clustering In Vertically Linked Industries," Journal of Regional Science, Wiley Blackwell, vol. 48(5), pages 991-1006, December.
    • Handle: RePEc:bla:jregsc:v:48:y:2008:i:5:p:991-1006
    DOI: 10.1111/j.1467-9787.2008.00580.x
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    References listed on IDEAS

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    1. Amiti, Mary, 2005. "Location of vertically linked industries: agglomeration versus comparative advantage," European Economic Review, Elsevier, vol. 49(4), pages 809-832, May.
    2. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens iii, 2009. "Firm Fragmentation And Urban Patterns," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 143-186, February.
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    Cited by:

    1. Stein Østbye, 2010. "Regional Policy Analysis In A Simple General Equilibrium Model With Vertical Linkages," Journal of Regional Science, Wiley Blackwell, vol. 50(3), pages 756-775, August.
    2. Armando J. Garcia Pires & José Pedro Pontes, 2015. "Economic development according to Friedrich List," Working Papers Department of Economics 2015/03, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.

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