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A simple theory of industry location and residence choice

  • Rainald Borck
  • Michael Pflüger
  • Matthias Wrede

This paper provides a simple theory of geographical mobility which simultaneously explains people’s choice of residences in space and the location of industry. Residences are chosen on the basis of the utility which mobile households obtain across locations. The spatial pattern of industry is determined by the location decision of a scarce essential factor of production which seeks to obtain the highest possible economic return. Our theory comprehends applications to commuting and physical capital mobility. Referring to the decline in mobility costs, we are able to explain that long-distance commuting and foreign direct investment have increased and that industrial activity has become more concentrated both within as well as across countries.

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File URL: http://hdl.handle.net/10.1093/jeg/lbp046
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Article provided by Oxford University Press in its journal Journal of Economic Geography.

Volume (Year): 10 (2010)
Issue (Month): 6 (November)
Pages: 913-940

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Handle: RePEc:oup:jecgeo:v:10:y:2010:i:6:p:913-940
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  1. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
  2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  3. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  4. Richard E. Baldwin & Philippe Martin, 1999. "Two Waves of Globalisation: Superficial Similarities, Fundamental Differences," NBER Working Papers 6904, National Bureau of Economic Research, Inc.
  5. Ogura, Laudo M., 2005. "Urban growth controls and intercity commuting," Journal of Urban Economics, Elsevier, vol. 57(3), pages 371-390, May.
  6. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  7. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 2003. "Agglomeration and economic geography," CORE Discussion Papers 2003016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Takatoshi Tabuchi & Jacques-François Thisse, 2006. "Regional Specialization, Urban Hierarchy, And Commuting Costs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1295-1317, November.
  9. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
  10. Thomas Matha & Ladislav Wintr, 2009. "Commuting flows across bordering regions: a note," Applied Economics Letters, Taylor & Francis Journals, vol. 16(7), pages 735-738.
  11. Tabuchi, Takatoshi, 1998. "Urban Agglomeration and Dispersion: A Synthesis of Alonso and Krugman," Journal of Urban Economics, Elsevier, vol. 44(3), pages 333-351, November.
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