On the Evolution of the Spatial Economy with Multi-unit/Multi-plant Firms: The Impact of IT Development

Masahisa Fujita and Gokan Toshitaka

No 16, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This paper examines how the decline of communication costs between management and production facilities within firms and the decrease in trade costs of manufactured goods affect the spatial organization of a two-region economy with multi-unit/multi-plant firms.The development of information technology decreases the costs of communication and trade costs. Thus, the fragmentation of firms is promoted. Our result indicates that, with decreasing communication costs, firms producing low trade-cost products (such as consumer electronics) tend to concentrate their manufacturing plants in low wage countries. In contrast, firms producing high trade-cost products (such as automobiles) tend to have multiple plants serving to segmented markets, even in the absence of wage differentials.

Keywords: Agglomeration; Headquarters; Plants; Supply chain; Re-location; Monopolistic competition; Information technologies (technology); International division of labor; Costs; Communication; International trade; 情報技術; 国際分業; コスト; コミュニケーション; 貿易 (search for similar items in EconPapers)
JEL-codes: F12 L13 R13 (search for similar items in EconPapers)
Date: 2004-11-01
New Economics Papers: this item is included in nep-geo, nep-ict, nep-int and nep-ure
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Published in IDE Discussion Paper = IDE Discussion Paper, No. 16. 2004-11-01

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https://ir.ide.go.jp/record/38149/files/IDP000016_001.pdf First version, 2004 (application/pdf)

Related works:
Journal Article: On the evolution of the spatial economy with multi-unit · multi-plant firms: the impact of IT development (2005)
Working Paper: On the evolution of the spatial economy with multi-uni-multi-plant firms: the impact of IT development (2004)
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