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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

    as
    1. Henderson, J Vernon & Kuncoro, Ari, 1996. "Industrial Centralization in Indonesia," World Bank Economic Review, World Bank Group, vol. 10(3), pages 513-540, September.
    2. 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.
    3. Amiti, Mary, 2005. "Location of vertically linked industries: agglomeration versus comparative advantage," European Economic Review, Elsevier, vol. 49(4), pages 809-832, May.
    4. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
    5. Mary Amiti, 1998. "Regional Specialisation and Technological Leapfrogging," Working Papers 1998.14, School of Economics, La Trobe University.
    6. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    7. 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.
    8. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    9. 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, January.
    10. repec:hhs:iuiwop:430 is not listed on IDEAS
    11. 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.
    12. 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.
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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