Which Firms are Left in the Periphery? - Spatial Sorting of Heterogeneous Firms with Scale Economies in Transportation

18 Pages Posted: 3 Apr 2013

See all articles by Rikard Forslid

Rikard Forslid

Stockholm University; Centre for Economic Policy Research (CEPR)

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI)

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Date Written: March 2013

Abstract

This paper introduces scale economies or density economies in transportation in a trade and geography model with heterogeneous firms. This relatively small change to the standard model produces a new pattern of spatial sorting among firms. Contrary to the existing literature, our model produces the result that firms of intermediate productivity relocate to the large core region, whereas high and low productivity firms remain in the periphery. Trade liberalisation leads to a gradual relocation to the core, with the most productive firms remaining in the periphery.

Keywords: heterogeneous firms, scale economies in transportation

JEL Classification: F12, F15

Suggested Citation

Forslid, Rikard and Okubo, Toshihiro, Which Firms are Left in the Periphery? - Spatial Sorting of Heterogeneous Firms with Scale Economies in Transportation (March 2013). CEPR Discussion Paper No. DP9413, Available at SSRN: https://ssrn.com/abstract=2244093

Rikard Forslid (Contact Author)

Stockholm University ( email )

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI) ( email )

PO Box 136
Geneva, CH-1211
Switzerland
+41 22 908 5900 (Phone)

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