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Geographic concentration and establishment size: analysis in an alternative economic geography model

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  • Thomas J. Holmes
  • John J. Stevens

Abstract

Big cities specialize in services rather than manufacturing. Big-city establishments in services are larger than the national average while those in manufacturing are smaller. This paper proposes an explanation of these and other facts. The theory is developed in an economic geography model that is an alternative to the standard Dixit-Stiglitz structure. In our tractable structure that has potentially wider application, firms have monopoly power in local markets, but are price takers in export markets.

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  • Thomas J. Holmes & John J. Stevens, 2002. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Finance and Economics Discussion Series 2002-17, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2002-17
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    1. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
    2. Thomas J. Holmes & John J. Stevens, 2002. "The home market and the pattern of trade: round three," Staff Report 304, Federal Reserve Bank of Minneapolis.
    3. 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, September.
    4. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    5. 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.
    6. Amiti, Mary, 1998. "Inter-industry trade in manufactures: Does country size matter?," Journal of International Economics, Elsevier, vol. 44(2), pages 231-255, April.
    7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    8. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
    9. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    10. Thomas J. Holmes, 1999. "Scale of Local Production and City Size," American Economic Review, American Economic Association, vol. 89(2), pages 317-320, May.
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    Keywords

    Regional economics; Service industries;

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