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Industry location and wages: The role of market size and accessibility in trading networks

Javier Barbero, Kristian Behrens () and José Zofío

Regional Science and Urban Economics, 2018, vol. 71, issue C, 1-24

Abstract: We analyze the effects of local market size and accessibility on the spatial distribution of economic activity and wages in general equilibrium trade models with many asymmetric countries and costly trade for all goods. In models with a homogeneous sector, local market size is generally more strongly correlated with a country's industry share, whereas accessibility better explains a country's wage. We analytically show that result in a simplified case and then confirm it using simulations with random trading networks. In models with only differentiated sectors, both local market size and accessibility are highly correlated with wages. The impact of local market size on industry location is more robust than the impact of local market size on wages in economic geography models.

Keywords: Market size; Accessibility; Trading networks; Industry location; Wages (search for similar items in EconPapers)
JEL-codes: R12 F12 C63 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Industry location and wages: The role of market size and accessibility in trading networks (2015) Downloads
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