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Market size and urban hierarchy

  • BEHRENS, Kristian

We investigate the importance of market size as a determinant for industrial location patterns. In order to focus on a broad range of sectors,including the service industries, both traded and non-traded goods are taken into consideration. In our model, traded goods industries always exhibit a "home market effect" (HME), whereas the existence of such an effect for non-traded goods and services crucially hinges on the degree of product differentiation. High degrees of product differentiation generally support a HME, whereas a reverse HME may arise when products are sufficiently close substitutes. Our results point to the existence of some market size dependent "industrial urban" hierarchy: highly differentiated non-traded services are more sensitive to market size than manufacturingactivities and traded services, which in turn are more sensitive to market size than closely substitutable non-traded services.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004029.

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Date of creation: 00 May 2004
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Handle: RePEc:cor:louvco:2004029
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  1. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999. "Agglomeration and Trade Revisited," CIRJE F-Series CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
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  10. Ottaviano, Gianmarco & Thisse, Jacques-Francois, 2004. "Agglomeration and economic geography," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 58, pages 2563-2608 Elsevier.
  11. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(2), pages 284-314, June.
  12. Greenhut, Melvin L, 1981. "Spatial Pricing in the United States, West Germany and Japan," Economica, London School of Economics and Political Science, vol. 48(189), pages 79-86, February.
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  15. Behrens, Kristian, 2004. "Agglomeration without trade: how non-traded goods shape the space-economy," Journal of Urban Economics, Elsevier, vol. 55(1), pages 68-92, January.
  16. Holmes, Thomas J. & Stevens, John J., 2004. "Spatial distribution of economic activities in North America," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 63, pages 2797-2843 Elsevier.
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