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Agglomeration, vertical specialization, and the strength of industrial linkages

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  • Kranich, Jan

Abstract

Referring to the seminal model of Venables, this paper aims at quantifying the degree of vertical specialization in models of the new economic geography. The analysis is made in two steps. First, the paper develops a measuring concept for the strength of forward and backward linkages. As a main finding, the associated values only depend on the substitution elasticity between intermediate inputs as well as the corresponding share in downstream costs. In the second step, the Venables model is alternatively solved in order to determine the domain of vertical specialization and investigates its properties with respect to the strength of vertical linkages.

Suggested Citation

Handle: RePEc:eee:paresc:v:90:y:2011:i:1:p:159-179
DOI: 10.1111/j.1435-5957.2010.00290.x
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File URL: http://www.sciencedirect.com/science/article/pii/S105681902302081X
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JEL classification:

  • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
  • F14 - International Economics - - Trade - - - Empirical Studies of Trade
  • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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