IDEAS home Printed from https://ideas.repec.org/p/lue/wpaper/20.html
   My bibliography  Save this paper

The Strength of Vertical Linkages

Author

Listed:
  • Jan Kranich

    (Institute of Economics, University of Lüneburg)

Abstract

This paper discusses the interdenpendencies that exist between vertically-linked industries in the (Spence-)Dixit-Stiglitz model of monopolistic competition. The main objective is to develop a concept for quantifying the magnitude of sectoral coherence in models of the New Economic Geography. It is motivated by the suggestion, by Venables (1996), that `strategic industries` be identified in terms of their agglomeration potential. Using a partial-analytic approach, we focus on inter-industrial relations in a closed economy to draw conclusions regarding international trade. We ascertain that two factors have an impact upon the strength of industrial linkages: 1) the monopolistic scope of intermediate suppliers, in terms of (technical) substitution elasticity; and the share in downstream costs for intermediates. Within a simulation study, this paper applies this new theoretical concept to eight basic industries across ten European countries.

Suggested Citation

  • Jan Kranich, 2006. "The Strength of Vertical Linkages," Working Paper Series in Economics 20, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:20
    as

    Download full text from publisher

    File URL: https://www.leuphana.de/fileadmin/user_upload/Forschungseinrichtungen/ifvwl/WorkingPapers/lue/pdf/wp_20_Upload.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 857-880.
    2. 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, December.
    3. 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.
    4. David L. Hummels & Dana Rapoport & Kei-Mu Yi, 1998. "Vertical specialization and the changing nature of world trade," Economic Policy Review, Federal Reserve Bank of New York, vol. 4(Jun), pages 79-99.
    5. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
    6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    7. Francisco L. Rivera-Batiz & Luis A. Rivera-Batiz, 2018. "Increasing Returns, Monopolistic Competition, and Agglomeration Economies in Consumption and Production," World Scientific Book Chapters, in: Francisco L Rivera-Batiz & Luis A Rivera-Batiz (ed.), International Trade, Capital Flows and Economic Development, chapter 6, pages 141-176, World Scientific Publishing Co. Pte. Ltd..
    8. 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 341-359, May.
    9. Gianmarco I.P. Ottaviano & Frédéric Robert-Nicoud, 2006. "The 'genome' of NEG models with vertical linkages: a positive and normative synthesis," Journal of Economic Geography, Oxford University Press, vol. 6(2), pages 113-139, April.
    10. K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers 2008 - 2015 142, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    11. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
    12. Yeats, Alexander J., 1998. "Just how big is global production sharing?," Policy Research Working Paper Series 1871, The World Bank.
    13. repec:hhs:iuiwop:430 is not listed on IDEAS
    14. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    15. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jan Kranich, 2007. "Too much R&D? - Vertical differentiation in a model of monopolistic competition," Working Paper Series in Economics 59, University of Lüneburg, Institute of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jan Kranich, 2011. "Agglomeration, vertical specialization, and the strength of industrial linkages," Papers in Regional Science, Wiley Blackwell, vol. 90(1), pages 159-178, March.
    2. Stephen J. Redding, 2013. "Economic Geography: A Review of the Theoretical and Empirical Literature," Palgrave Macmillan Books, in: Daniel Bernhofen & Rod Falvey & David Greenaway & Udo Kreickemeier (ed.), Palgrave Handbook of International Trade, chapter 16, pages 497-531, Palgrave Macmillan.
    3. Paolo Guerrieri & Filippo Vergara Caffarelli, 2004. "International Fragmentation of Production and Euro-Med Integration," EUI-RSCAS Working Papers 28, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    4. Karolina Ekholm & Katariina Hakkala, 2007. "Location of R&D and High-Tech Production by Vertically Integrated Multinationals," Economic Journal, Royal Economic Society, vol. 117(518), pages 512-543, March.
    5. Epifani, Paolo, 2005. "Heckscher-Ohlin and agglomeration," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 645-657, November.
    6. Kristian Behrens & Frédéric Robert‐Nicoud, 2009. "Krugman's Papers in Regional Science: The 100 dollar bill on the sidewalk is gone and the 2008 Nobel Prize well‐deserved," Papers in Regional Science, Wiley Blackwell, vol. 88(2), pages 467-489, June.
    7. Fabien Candau, 2013. "Trade, FDI and Migration," International Economic Journal, Taylor & Francis Journals, vol. 27(3), pages 441-461, September.
    8. Massimo Del Gatto, 2004. "Agglomeration, Integration, and Territorial Authority Scale in a System of Trading Cities. Centralisation versus Devolution," Working Papers 2004.93, Fondazione Eni Enrico Mattei.
    9. Frédéric Robert-Nicoud, 2006. "Agglomeration and Trade with Input–Output Linkages and Capital Mobility," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(1), pages 101-126.
    10. Alberto Franco Pozzolo, 2004. "Research and Development, Regional Spillovers and the Location of Economic Activities," Manchester School, University of Manchester, vol. 72(4), pages 463-482, July.
    11. Michael C. Burda & Barbara Dluhosch, 2002. "Fragmentation, Globalisation and Labour Markets," International Economic Association Series, in: David Greenaway & Richard Upward & Katharine Wakelin (ed.), Trade, Investment, Migration and Labour Market Adjustment, chapter 4, pages 47-65, Palgrave Macmillan.
    12. Fabien Candau, 2008. "Entrepreneurs' Location Choice And Public Policies: A Survey Of The New Economic Geography," Journal of Economic Surveys, Wiley Blackwell, vol. 22(5), pages 909-952, December.
    13. Nicholas Crafts & Anthony Venables, 2003. "Globalization in History.A Geographical Perspective," NBER Chapters, in: Globalization in Historical Perspective, pages 323-370, National Bureau of Economic Research, Inc.
    14. Giuseppe Francesco Gori & Renato Paniccià, 2015. "A structural multisectoral model with new economic geography linkages for Tuscany," Papers in Regional Science, Wiley Blackwell, vol. 94, pages 175-196, November.
    15. Ottaviano, Gianmarco & Thisse, Jacques-Francois, 2004. "Agglomeration and economic geography," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 58, pages 2563-2608, Elsevier.
    16. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.
    17. Bellone Flora, 2005. "IT adoption and spatial agglomeration - a model of cumulative adoption in a small open economy," ERSA conference papers ersa05p731, European Regional Science Association.
    18. Joseph F. Francois & Douglas Nelson, 2002. "A Geometry Of Specialisation," Economic Journal, Royal Economic Society, vol. 112(481), pages 649-678, July.
    19. Lopez-Gonzalez, Javier, 2012. "The Impact of Free Trade Agreements on Vertical Specialisation," Papers 442, World Trade Institute.
    20. Amiti, Mary, 2005. "Location of vertically linked industries: agglomeration versus comparative advantage," European Economic Review, Elsevier, vol. 49(4), pages 809-832, May.

    More about this item

    Keywords

    New Economic Geography; Vertical Linkages;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lue:wpaper:20. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Wagner (email available below). General contact details of provider: https://leuphana.de/institute/ivwl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.