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Does History Matter Only When it Matters Little? The Case of City-Indu try Location

  • James E. Rauch

When will an industry subject to agglomeration economies move from an old, high-cost site to a new, low-cost site? It is argued that history, in the form of sunk costs resulting from the operation of many firms at a site, creates a first-mover disadvantage that can prevent relocation. It is demonstrated that developers of industrial parks can partly overcome this inertia through discriminatory pricing of land over time, and empirical evidence is provided that they actually engage in such behavior. It is also shown that other aspects of developer land-sale strategy can be a source of information on the nature of interfirm externalities.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4312.

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Date of creation: Apr 1993
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Publication status: published as The Quarterly Journal of Economics, vol. cviii, issue 3, August 1993, (MIT Press, Cambridge), p. 843-867
Handle: RePEc:nbr:nberwo:4312
Note: ITI EFG
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