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The Role of Cities: Evidence From the Placement of Sales Offices

  • Thomas J Holmes

What is the force of attraction of cities? Leading explanations include the advantages of a con-centrated market and knowledge spillovers. This paper develops a model of firm location decisions in which it is possible to distinguish the importance of the concentrated-market motive from other motives, including knowledge spillovers. A key aspect of the model is that it allows for the firm to choose multiple locations. The theory is applied to study the placement of manufacturing sales offices. The implications of the concentrated-market motive are found to be a salient feature of U.S. Census micro data. The structural parameters of the model are estimated. The concentrated-market motive is found to account for approximately half of the concentration of sales offices in large cities.

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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 02-02.

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Date of creation: Jan 2002
Date of revision:
Handle: RePEc:cen:wpaper:02-02
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  1. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
  2. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  3. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-42, April.
  4. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA.
  5. Robert E. Lucas, Jr., 2001. "Externalities and Cities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 245-274, April.
  6. Davis, D.R. & Weinstein, D.E., 1997. "Does Economic Geography Matter for International Specialization?," Papers 591, Harvard - Institute for International Development.
  7. Guy Dumais & Glenn Ellison & Edward L Glaeser, 1998. "Geographic Concentration as a Dynamic Process," Working Papers 98-3, Center for Economic Studies, U.S. Census Bureau.
  8. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August.
  9. Edward Glaeser, 1997. "Learning in Cities," NBER Working Papers 6271, National Bureau of Economic Research, Inc.
  10. repec:oup:qjecon:v:114:y:1999:i:3:p:739-767 is not listed on IDEAS
  11. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  12. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
  13. Henderson, J. Vernon, 1986. "Efficiency of resource usage and city size," Journal of Urban Economics, Elsevier, vol. 19(1), pages 47-70, January.
  14. repec:oup:qjecon:v:108:y:1993:i:3:p:577-98 is not listed on IDEAS
  15. 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.
  16. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April.
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