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Agglomeration and comparative advantage in vertically-related firms

  • José Pedro Pontes

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.

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File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp172006.pdf
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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2006/17.

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Date of creation: 2006
Date of revision:
Handle: RePEc:ise:isegwp:wp172006
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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  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. M Fujita, 1981. "Location of firms with input transactions," Environment and Planning A, Pion Ltd, London, vol. 13(11), pages 1401-1414, November.
  3. Mayer, T., 1999. "Spatial Cournot Competition and Heterogeneous Production Costs Across Locations," Papiers d'Economie Mathématique et Applications 1999.89, Université Panthéon-Sorbonne (Paris 1).
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