The empirics of spatial competition: evidence from european regions

Néstor Duch Brown

SCIENZE REGIONALI, 2007, vol. 2007/1, issue 1, 35-60

Abstract: The Empirics of Spatial Competition: Evidence from European Regions (by N?stor Duch) - ABSTRACT: Brown Department of Econometrics, Statistics and Spanish Economy, Universitat de Barcelona1 (Paper first received, October 2005; in final form, September 2006) Abstract The New Economic Geography literature allows detailed analysis of the factors that determine the location decisions of firms in integrated markets. However, the competitive process is modelled in a rather rudimentary way, and the empirical evidence has usually been obtained from reduced-form econometric specifications. This study describes a structural model that takes into account strategic interactions between firms. It investigates the relationship between the degree of perceived competition not only from local firms, but also from distant firms in other regions and geographic concentration, and compares the results with classical spatial conjectures. The results indicate that, in aggregate terms, firms face stronger competition from local rivals than from firms in other regions. Moreover, they confirm that greater geographical concentration of production reduces market power, owing to the intensification of local competition; however, its impact on production costs is unclear. Keywords: spatial competition, agglomeration, conjectural variations. JEL-classification codes: F15, L11, L23, R15.

Date: 2007
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