Working Paper: CEPR ID: DP4234
Authors: Mary Amiti; Lisa Cameron
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; economic geography; vertical linkages
JEL Codes: F10; L60; R10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Supplier Access (SA) (L81) | Wages (W) (J31) |
| Market Access (MA) (L10) | Wages (W) (J31) |
| Labor Pooling (J68) | Wages (W) (J31) |
| Technological and Knowledge Spillovers (O36) | Wages (W) (J31) |