The trade-off between agglomeration force: Evidence from firm-level location data 1974-1998
2005 (English)Report (Other academic)
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.
CESIS Working Paper Series in Economics and Institutions of Innovation, 30
FDI, agglomeration, relative costs
IdentifiersURN: urn:nbn:se:kth:diva-72360OAI: oai:DiVA.org:kth-72360DiVA: diva2:487521
QC 201202082012-02-082012-01-312012-02-08Bibliographically approved