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The trade-off between agglomeration force: Evidence from firm-level location data 1974-1998
KTH, School of Industrial Engineering and Management (ITM), Centres, Centre of Excellence for Science and Innovation Studies, CESIS. KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Economics.ORCID iD: 0000-0003-0218-7924
KTH, School of Industrial Engineering and Management (ITM), Centres, Centre of Excellence for Science and Innovation Studies, CESIS. KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Economics.ORCID iD: 0000-0001-8377-1633
2005 (English)Report (Other academic)
Abstract [en]

The theoretical prediction of a trade-off between production costs and agglomeration economiesadvanced in recent “new economic” geography models has – despite its important policyimplications – not been exposed to empirical testing. Based on a standard model where labormobility is assumed to differ between two regions - the “European Union” (EU) and the “world”- the empirical analysis shows that a ten percent increase in relative wages decreases entry byMNCs by approximately nine percent in EU, but only by three percent in the “world.” Or, putdifferently, a ten percent increase in relative wages in EU requires an increase by 26 percent inagglomeration to keep production levels unaltered. To our knowledge, this is the first attempt toempirically estimate this trade-off.

Place, publisher, year, edition, pages
CESIS, KTH Royal Institute of Technology , 2005. , 50 p.
Series
CESIS Working Paper Series in Economics and Institutions of Innovation, 30
Keyword [en]
FDI, agglomeration, relative costs
National Category
Economics
Identifiers
URN: urn:nbn:se:kth:diva-72360OAI: oai:DiVA.org:kth-72360DiVA: diva2:487521
Note
QC 20120208Available from: 2012-02-08 Created: 2012-01-31 Last updated: 2012-02-08Bibliographically approved

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Thulin, Per

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
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Language
  • de-DE
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