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Economic Geography and Wages

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  • Amiti, Mary
  • Cameron, Lisa

Abstract

This Paper estimates the agglomeration benefits that arise from vertical linkages between firms. The analysis is based on international trade and economic geography theory developed by Krugman and Venables (1995). We identify the agglomeration benefits of the spatial variation in firm level nominal wages. Unusually detailed intermediate input data allow us to capture more accurately spatial input/output linkages than in previous studies. 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 understanding of the extent and strength of spatial linkages is crucial in shaping policies that seek to influence regional development.

Suggested Citation

  • Amiti, Mary & Cameron, Lisa, 2004. "Economic Geography and Wages," CEPR Discussion Papers 4234, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4234
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    References listed on IDEAS

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    1. Amiti, Mary, 2005. "Location of vertically linked industries: agglomeration versus comparative advantage," European Economic Review, Elsevier, vol. 49(4), pages 809-832, May.
    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. 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.
    4. 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, April.
    5. Redding, Stephen & Venables, Anthony J., 2004. "Economic geography and international inequality," Journal of International Economics, Elsevier, vol. 62(1), pages 53-82, January.
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    7. 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.
    8. Mary Amiti, 1998. "Regional Specialisation and Technological Leapfrogging," Working Papers 1998.14, School of Economics, La Trobe University.
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    More about this item

    Keywords

    agglomeration; economic geography; vertical linkages;
    All these keywords.

    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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