The trade-off between agglomeration forces and relative costs: EU versus the “world” Evidence from firm-level location data 1974-1998
Pontus Braunerhjelm and
Per Thulin (per.thulin@indek.kth.se)
No 30, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies
Abstract:
The theoretical prediction of a trade-off between production costs and agglomeration economies advanced in recent “new economic” geography models has – despite its important policy implications – not been exposed to empirical testing. Based on a standard model where labor mobility 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 by MNCs by approximately nine percent in EU, but only by three percent in the “world.” Or, put differently, a ten percent increase in relative wages in EU requires an increase by 26 percent in agglomeration to keep production levels unaltered. To our knowledge, this is the first attempt to empirically estimate this trade-off.
Keywords: FDI; agglomeration; relative costs (search for similar items in EconPapers)
JEL-codes: F15 F20 F23 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2005-05-09
New Economics Papers: this item is included in nep-eec and nep-int
References: Add references at CitEc
Citations:
Downloads: (external link)
https://static.sys.kth.se/itm/wp/cesis/cesiswp30.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0030
Access Statistics for this paper
More papers in Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Vardan Hovsepyan (vardan.hovsepyan@indek.kth.se).