Agglomeration and comparative advantage in vertically-related firms

José Pontes

No 2006/17, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: This paper models, in game-theoretical terms, the location of two vertically-linked monopolistic firms in a spatial economy formed by a large, high labor cost country and a relatively small, low labor cost country. It is found that the decrease in transport costs shifts firms towards the low production cost country. This process takes two different forms: in labor-intensive industries it leads to spatial fragmentation; in industries with strong input-output relations, agglomerations are conserved, although they shift toward the low labor cost country.

Keywords: Location; Intermediate goods; Agglomeration; Comparative advantage. (search for similar items in EconPapers)
JEL-codes: F10 F12 R30 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-geo, nep-int and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp172006

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