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Vertical Linkages and Multinational Plant Size

  • José Pedro Pontes

This paper deals with the location of input supply in a two country spatial economy. A duopoly supplies intermediate goods to a perfectly competitive consumer good industry that operates with a quadratic production function inspired in PENG, THISSE and WANG (2006). Since the consumer good is non-tradable, the downstream industry locates in both countries and can be viewed as made by a set of multinational firms. On the one hand joint location of the upstream firms is caused by a localization economy and by the intensity of the demand addressed to the industry. On the other hand production and transport costs of the input lead to dispersed locations by the upstream firms. If the input suppliers agglomerate, the neighboring downstream plant operates with a larger size that the distant one. Key words: Vertically-linked industries; Location; Oligopoly; Transport Costs

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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 2009/30.

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Date of creation: Sep 2009
Date of revision:
Handle: RePEc:ise:isegwp:wp302009
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
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  1. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February.
  2. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
  3. Shin-Kun Peng & Jacques-François Thisse & Ping Wang, 2005. "Economic Integration and Agglomeration in a Middle Product Economy," IEAS Working Paper : academic research 05-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan.
  4. BELLEFLAMME, Paul & PICARD, Pierre & THISSE, Jacques-François, . "An economic theory of regional clusters," CORE Discussion Papers RP 1464, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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