Agglomeration in a Core-Periphery Model with Vertically and Horizontally Integrated Firms

Karolina Ekholm () and Rikard Forslid

No 1607, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper analyses the effect of allowing for a more general production structure in the core-periphery (CP) model. Two special cases of fully horizontally- and vertically-integrated firms are treated. The case of horizontally-integrated firms is a counter-example to the strong agglomeration effects found in the CP model. A symmetric equilibrium will always be stable and hence agglomeration is prevented. The introduction of vertically-integrated firms that can separate the location of headquarter activities from the location of production, has two effects. First, it tends to break the symmetry of the original CP model and thus lead to more agglomeration. Second, it also tends to decrease the parameter space in which full agglomeration occurs, and therefore leads to less agglomeration.

Keywords: Agglomeration; Economic Geography; Horizontally Integrated Firms; Vertically Integrated Firms (search for similar items in EconPapers)
JEL-codes: F12 F15 R12 (search for similar items in EconPapers)
Date: 1997-03
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Citations: View citations in EconPapers (3)

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