Economy vs. History: What Does Actually Determine the Distribution of Firms' Locations in Cities?

Helge Sanner

No 67, Volkswirtschaftliche Diskussionsbeiträge from Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät

Abstract: The aim of this study is to examine in which cases economic forces or historical singularities prevail in the determination of the long-run distribution of firms. We develop a relatively general model of heterogenous firms' location choice in discrete space. The main force towards an agglomerated structure is the reduction of transaction costs for consumers if firms are located closely, whilst competition and transport costs work towards a more disperse structure. We then assess the importance of the initial conditions by simulating and comparing the resulting distribution of firms for identical economic parameters but varying initial settings. If the equilibrium distributions of firms are similar we conclude that economic forces have prevailed, while differences in the resulting distributions indicate that 'history' is more important. The (dis)similarity of distributions of firms is calculated by means of a measure, which exhibits a number of desirable features.

Keywords: Firm location choice; Discrete space; Path dependency (search for similar items in EconPapers)
JEL-codes: C61 L11 R12 (search for similar items in EconPapers)
Date: 2004-06, Revised 2004-09
New Economics Papers: this item is included in nep-geo, nep-his and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:pot:vwldis:67b

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