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More similar firms — More similar regions? On the role of firm heterogeneity for agglomeration

Listed author(s):
  • von Ehrlich, Maximilian
  • Seidel, Tobias

In contrast to what several papers have argued recently, we show that firm heterogeneity fosters agglomeration of economic activity. If firms are more similar with respect to their total factor productivity, each company faces a lower propensity to export. This renders the home market more important speaking against agglomeration. We also relate changes in firm heterogeneity to technological progress which allows us to derive novel insights on the role of technology for the location of economicactivity.

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File URL: http://www.sciencedirect.com/science/article/pii/S0166046213000227
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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 43 (2013)
Issue (Month): 3 ()
Pages: 539-548

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Handle: RePEc:eee:regeco:v:43:y:2013:i:3:p:539-548
DOI: 10.1016/j.regsciurbeco.2013.02.007
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

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  1. Toshihiro Okubo, 2006. "Trade Liberalisation and Agglomeration with Firm Heterogeneity - Forward and Backward Linkages," IHEID Working Papers 17-2006, Economics Section, The Graduate Institute of International Studies.
  2. Giulia Faggio & Kjell Salvanes & John Van Reenen, 2007. "The Evolution of Inequality in Productivity and Wages: Panel Data Evidence," NBER Working Papers 13351, National Bureau of Economic Research, Inc.
  3. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d'Agliano, University of Milano.
  4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
  5. Richard E. Baldwin & Toshihiro Okubo, 2006. "Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting," Journal of Economic Geography, Oxford University Press, vol. 6(3), pages 323-346, June.
  6. Pflüger, Michael & Suedekum, Jens, 2013. "Subsidizing firm entry in open economies," Journal of Public Economics, Elsevier, vol. 97(C), pages 258-271.
  7. Yeaple, Stephen & Helpman, Elhanan & Melitz, Marc, 2004. "Export versus FDI with Heterogeneous Firms," Scholarly Articles 3229098, Harvard University Department of Economics.
  8. Philippe Martin & Gianmarco Ottaviano, 2001. "Growth and Agglomeration," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00179826, HAL.
    • Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-968, November.
  9. Seidel, Tobias & von Ehrlich, Maximilian, 2013. "Regional Implications of Financial Market Development: Credit Rationing, Trade, and Location," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79700, Verein für Socialpolitik / German Economic Association.
  10. Rod Falvey & David Greenaway & Zhihong Yu, 2011. "Catching Up or Pulling Away: Intra-Industry Trade, Productivity Gaps and Heterogeneous Firms," Open Economies Review, Springer, vol. 22(1), pages 17-38, February.
  11. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  12. OKUBO, Toshihiro & PICARD, Pierre M. & THISSE, Jacques-François, "undated". "The spatial selection of heterogeneous firms," CORE Discussion Papers RP 2257, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Volker Nocke, 2003. "A Gap for Me: Entrepreneurs and Entry," PIER Working Paper Archive 05-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 29 Sep 2005.
  14. Demidova, Svetlana, 2005. "Productivity Improvements and Falling Trade Costs: Boon or Bane?," Working Papers 2-05-1, Pennsylvania State University, Department of Economics.
  15. Timothy Dunne & Lucia Foster & John Haltiwanger & Kenneth R. Troske, 2004. "Wage and Productivity Dispersion in United States Manufacturing: The Role of Computer Investment," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 397-430, April.
  16. Baldwin, Richard E & Forslid, Rikard, 2000. "The Core-Periphery Model and Endogenous Growth: Stabilizing and Destabilizing Integration," Economica, London School of Economics and Political Science, vol. 67(267), pages 307-324, August.
  17. Francesco Caselli, 1999. "Technological Revolutions," American Economic Review, American Economic Association, vol. 89(1), pages 78-102, March.
  18. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  19. Gianmarco I. P. Ottaviano, 2011. "'New' new economic geography: firm heterogeneity and agglomeration economies," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 231-240, March.
  20. Peter Egger & Tobias Seidel, 2008. "Agglomeration and fair wages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(1), pages 271-291, February.
  21. Hisamitsu Saito & Munisamy Gopinath & JunJie Wu, 2011. "Heterogeneous firms, trade liberalization and agglomeration," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 541-560, May.
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