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Trade and Location with Horizontal and Vertical Multi‐region Firms

Author

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  • Karolina Ekholm
  • Rikard Forslid

Abstract

We analyse the effect on agglomeration tendencies of allowing multi‐region firms in a standard trade and location model, the core–periphery (CP) model developed by Kurgman (1991). The introduction of horizontal multi‐region firms mitigates the agglomeration effects found in the CP model by reducing the range of trade costs for which the core–periphery equilibrium occurs. The introduction of vertical multi‐region firms that separate the location of headquarters and plants has two counteracting effects. While headquarters exhibit a strong tendency to concentrate, plants tend to spread out. The equilibrium is always asymmetric in spite of the underlying symmetry of the model.

Suggested Citation

  • Karolina Ekholm & Rikard Forslid, 2001. "Trade and Location with Horizontal and Vertical Multi‐region Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 101-118, March.
    • Handle: RePEc:bla:scandj:v:103:y:2001:i:1:p:101-118
    DOI: 10.1111/1467-9442.00232
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    Cited by:

    1. Kristian Behrens & Pierre M. Picard, 2007. "Welfare, home market effects, and horizontal foreign direct investment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(4), pages 1118-1148, November.
    2. Hayakawa, Kazunobu & Tsubota, Kenmei, 2022. "The impact of highways on commodity prices: The price of butter in Japan," Journal of Asian Economics, Elsevier, vol. 81(C).
    3. Biyue Lin & Shoukat Iqbal Khattak & Bei Zhao, 2021. "To Relocate Or Not to Relocate: A Logit Regression Model of Factors Influencing Corporate Headquarter Relocation Decision in China," SAGE Open, , vol. 11(3), pages 21582440211, July.
    4. Harry Garretsen & Jolanda Peeters, 2009. "FDI and the relevance of spatial linkages: do third-country effects matter for Dutch FDI?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(2), pages 319-338, July.
    5. Forslid, Rikard & Okubo, Toshihiro, 2023. "Trade, location, and multi-product firms," Regional Science and Urban Economics, Elsevier, vol. 100(C).
    6. Lapointe, Simon & Morand, Pierre-Henri, 2019. "Subsidy Bidding Wars and the Structure of Multi-Plant Firms," Working Papers 115, VATT Institute for Economic Research.

    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • 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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