The Strength of Vertical Linkages
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.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Venables, Anthony J, 1993.
"Equilibrium Locations of Vertically Linked Industries,"
CEPR Discussion Papers
802, C.E.P.R. Discussion Papers.
- 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.
- Anthony J. Venables, 1993. "Equilibrium Locations of Vertically Linked Industries," CEP Discussion Papers dp0137, Centre for Economic Performance, LSE.
- Paul Krugman, 1990.
"Increasing Returns and Economic Geography,"
NBER Working Papers
3275, National Bureau of Economic Research, Inc.
- Krugman, Paul & Venables, Anthony J, 1994.
"Globalization and the Inequality of Nations,"
CEPR Discussion Papers
1015, C.E.P.R. Discussion Papers.
- Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
- Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- 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.
- 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, issue Jun, pages 79-99.
- 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.
- Yeats, Alexander J., 1998. "Just how big is global production sharing?," Policy Research Working Paper Series 1871, The World Bank.
- Ottaviano, Gianmarco & Robert-Nicoud, Frédéric, 2004.
"The 'Genome' of NEG Models with Vertical Linkages: A Positive and Normative Synthesis,"
CEPR Discussion Papers
4600, C.E.P.R. Discussion Papers.
- 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.
- David L. Hummels & Jun Ishii & Kei-Mu Yi, 1999.
"The nature and growth of vertical specialization in world trade,"
72, Federal Reserve Bank of New York.
- 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.
- J. Peter Neary, 2000.
"Of hype and hyperbolas : introducing the new economic geography,"
200019, School of Economics, University College Dublin.
- 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.
- 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.
- 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.
- Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 125-153, February.
- repec:hhs:iuiwop:430 is not listed on IDEAS
- 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.
When requesting a correction, please mention this item's handle: RePEc:lue:wpaper:20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Wagner)
If references are entirely missing, you can add them using this form.