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Economic Geography and Wages

Author

Listed:
  • Mary Amiti

    (International Monetary Fund and CEPR)

  • Lisa Cameron

    (University of Melbourne)

Abstract

This paper estimates the agglomeration benefits that arise from vertical linkages between firms. We identify the agglomeration benefits off the spatial variation in firms' nominal wages. Using unusually detailed intermediate input data, we take account of the location of input suppliers to estimate cost linkages; and the location of demand from final consumers and other firms to estimate demand linkages. The results show that the externalities that arise from demand and cost linkages are quantitatively important and highly localized. An increase in either cost or demand linkages from the 10th to the 90th percentile increases wages by more than 20%. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Mary Amiti & Lisa Cameron, 2007. "Economic Geography and Wages," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 15-29, February.
    • Handle: RePEc:tpr:restat:v:89:y:2007:i:1:p:15-29
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    References listed on IDEAS

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    1. Henderson, J Vernon & Kuncoro, Ari, 1996. "Industrial Centralization in Indonesia," The World Bank Economic Review, World Bank, vol. 10(3), pages 513-540, September.
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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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