Economic Geography and Wages

Lisa Cameron and Mary Amiti

No 253, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: This paper estimates the agglomeration benefits that arise from vertical linkages between firms in the context of Indonesia. The analysis is based on international trade and economic geography theory developed by Krugman and Venables (1995). We identify the agglomeration benefits off the spatial variation in firm level nominal wages. Unusually detailed intermediate input data allow us to more accurately capture spatial input/output linkages than in previous studies. We take account of the location of input suppliers to estimate cost linkages; and the location of demand from final consumers and other firms to estimate demand linkages. The results show that the externalities that arise from demand and cost linkages are quantitatively important and highly localized. An understanding of the extent and strength of spatial linkages is crucial in shaping policies that seek to influence regional development.

Keywords: agglomeration; economic geography; vertical linkages. (search for similar items in EconPapers)
JEL-codes: F1 L6 R1 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-geo
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Working Paper: Economic Geography and Wages (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:ausm04:253

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