Agglomeration and comparative advantage in vertically-related firms
This paper models, in game-theoretical terms, the location of two vertically-linked monopolistic firms in a spatial economy formed by a large, high labor cost country and a relatively small, low labor cost country. It is found that the decrease in transport costs shifts firms towards the low production cost country. This process takes two different forms: in labor-intensive industries it leads to spatial fragmentation; in industries with strong input-output relations, agglomerations are conserved, although they shift toward the low labor cost country.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL|
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
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Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
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- Mayer, T., 1999. "Spatial Cournot Competition and Heterogeneous Production Costs Across Locations," Papiers d'Economie MathÃ©matique et Applications 1999.89, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Amiti, Mary, 2005.
"Location of vertically linked industries: agglomeration versus comparative advantage,"
European Economic Review,
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- Amiti, Mary, 2001. "Location of Vertically Linked Industries: Agglomeration versus Comparative Advantage," CEPR Discussion Papers 2800, C.E.P.R. Discussion Papers.
- M Fujita, 1981. "Location of Firms with Input Transactions," Environment and Planning A, , vol. 13(11), pages 1401-1414, November.
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