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Economic Geography and Wages

  • Mary Amiti

    (International Monetary Fund and CEPR)

  • Lisa Cameron

    (University of Melbourne)

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.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/rest.89.1.15
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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 89 (2007)
Issue (Month): 1 (February)
Pages: 15-29

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Handle: RePEc:tpr:restat:v:89:y:2007:i:1:p:15-29
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  1. Mary Amiti, 1998. "Regional Specialisation and Technological Leapfrogging," Working Papers 1998.14, School of Economics, La Trobe University.
  2. Guy Dumais & Glenn Ellison & Edward L. Glaeser, 2002. "Geographic Concentration As A Dynamic Process," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 193-204, May.
  3. Amiti, Mary, 2001. "Location of Vertically Linked Industries: Agglomeration versus Comparative Advantage," CEPR Discussion Papers 2800, C.E.P.R. Discussion Papers.
  4. Alatas, Vivi & Cameron, Lisa, 2003. "The impact of minimum wages on employment in a low income country : an evaluation using the difference-differences approach," Policy Research Working Paper Series 2985, The World Bank.
  5. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," International Trade 0103003, EconWPA.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  7. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August.
  8. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  9. Henderson, J Vernon & Kuncoro, Ari, 1996. "Industrial Centralization in Indonesia," World Bank Economic Review, World Bank Group, vol. 10(3), pages 513-40, September.
  10. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  11. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, June.
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