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Agglomeration,Trade and Selection

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  • Ottaviano, Gianmarco
Abstract
This paper studies how firm heterogeneity in terms of productivity affects the balance between agglomeration and dispersion forces in the presence of pecuniary externalities through a selection model of monopolistic competition with endogenous markups. It shows that firm heterogeneity matters. However, whether it shifts the balance from agglomeration to dispersion or the other way round depends on its specific features along the two defining dimensions of diversity: `richness' and `evenness'. Accordingly, the role of firm heterogeneity in selection models of agglomeration can not be fully understood without paying due attention to various moments of the underlying firm productivity distribution.

Suggested Citation

  • Ottaviano, Gianmarco, 2012. "Agglomeration,Trade and Selection," CEPR Discussion Papers 9046, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9046
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    References listed on IDEAS

    as
    1. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    2. Pierre‐Philippe Combes & Gilles Duranton & Laurent Gobillon & Diego Puga & Sébastien Roux, 2012. "The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection," Econometrica, Econometric Society, vol. 80(6), pages 2543-2594, November.
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    8. Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens, 2017. "Spatial frictions," Journal of Urban Economics, Elsevier, vol. 97(C), pages 40-70.
    9. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
    10. Okubo, Toshihiro & Picard, Pierre M. & Thisse, Jacques-François, 2010. "The spatial selection of heterogeneous firms," Journal of International Economics, Elsevier, vol. 82(2), pages 230-237, November.
    11. Volker Nocke, 2006. "A Gap for Me: Entrepreneurs and Entry," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 929-956, September.
    12. Behrens, Kristian & Robert-Nicoud, Frédéric, 2008. "Survival of the fittest in cities: agglomeration, selection, and polarisation," LSE Research Online Documents on Economics 28506, London School of Economics and Political Science, LSE Library.
    13. Carole Maignan & Gianmarco Ottaviano & Dino Pinelli & Francesco Rullani, 2003. "Bio-Ecological Diversity vs. Socio-Economic Diversity: A Comparison of Existing Measures," Working Papers 2003.13, Fondazione Eni Enrico Mattei.
    14. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    15. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity (DOI:10.111/j.1467-937x.2007.00463.x)," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 985-985.
    16. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
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    Cited by:

    1. von Ehrlich, Maximilian & Seidel, Tobias, 2015. "Regional implications of financial market development: Industry location and income inequality," European Economic Review, Elsevier, vol. 73(C), pages 85-102.
    2. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    3. Breinlich, Holger & Ottaviano, Gianmarco I.P. & Temple, Jonathan R.W., 2014. "Regional Growth and Regional Decline," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 4, pages 683-779, Elsevier.
    4. Nocco, Antonella & Ottaviano, Gianmarco I.P. & Salto, Matteo, 2017. "Monopolistic competition and optimum product selection: Why and how heterogeneity matters," Research in Economics, Elsevier, vol. 71(4), pages 704-717.
    5. Shengjun Zhu & Canfei He & Xinming Xia, 2019. "Geography of productivity: evidence from China’s manufacturing industries," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 141-168, February.
    6. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 171-245, Elsevier.
    7. Békés, Gábor & Harasztosi, Péter, 2013. "Agglomeration premium and trading activity of firms," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 51-64.
    8. Amendolagine, Vito & Crescenzi, Riccardo & Rabellotti, Roberta, 2022. "The geography of acquisitions and greenfield investments: firm heterogeneity and regional institutional conditions," LSE Research Online Documents on Economics 115597, London School of Economics and Political Science, LSE Library.
    9. Lu Lan & Gao Qisheng & Zhan Chenglin, 2023. "Influence Mechanism Analysis of the Spatial Evolution of Inter-Provincial Population Flow in China Based on Epidemic Prevention and Control," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 42(3), pages 1-22, June.
    10. KONDO Keisuke, 2016. "Testing for Agglomeration Economies and Firm Selection in Spatial Productivity Differences: The case of Japan," Discussion papers 16098, Research Institute of Economy, Trade and Industry (RIETI).
    11. Xi Yang & Dao‐Zhi Zeng, 2021. "Trade liberalisation with mobile capital and firm heterogeneity," The World Economy, Wiley Blackwell, vol. 44(2), pages 530-559, February.
    12. repec:esx:essedp:729 is not listed on IDEAS
    13. Fabien Candau & Elisa Dienesch, 2015. "Spatial distribution of skills and regional trade integration," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 451-488, March.
    14. Liu, Zheming & Zeng, Saixing & Jin, Zhizhou & Shi, Jonathan Jingsheng, 2022. "Transport infrastructure and industrial agglomeration: Evidence from manufacturing industries in China," Transport Policy, Elsevier, vol. 121(C), pages 100-112.
    15. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.
    16. Christian Ghiglino & Antonella Nocco, 2017. "When Veblen meets Krugman: social network and city dynamics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(2), pages 431-470, February.
    17. Kristian Behrens & Frédéric Robert‐Nicoud, 2014. "Survival of the Fittest in Cities: Urbanisation and Inequality," Economic Journal, Royal Economic Society, vol. 124(581), pages 1371-1400, December.

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    More about this item

    Keywords

    Agglomeration; Economic geography; Heterogeneity; Selection; Trade;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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