Economic Geography and Wages

Mary Amiti and Lisa Cameron

No 4234, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper estimates the agglomeration benefits that arise from vertical linkages between firms. The analysis is based on international trade and economic geography theory developed by Krugman and Venables (1995). We identify the agglomeration benefits of the spatial variation in firm level nominal wages. Unusually detailed intermediate input data allow us to capture more accurately spatial input/output linkages than in previous studies. We take account of the location of input suppliers to estimate cost linkages; and the location of demand from final consumers and other firms to estimate demand linkages. The results show that the externalities that arise from demand and cost linkages are quantitatively important and highly localized. An understanding of the extent and strength of spatial linkages is crucial in shaping policies that seek to influence regional development.

Keywords: Agglomeration; Vertical linkages; Economic geography (search for similar items in EconPapers)
JEL-codes: F10 L60 R10 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-geo and nep-ure
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Citations: View citations in EconPapers (30)

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Related works:
Journal Article: Economic Geography and Wages (2007)
Working Paper: Economic Geography and Wages (2004)
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