Geography, Productivity and Trade: Does Selection Explain Why Some Locations Are More Productive than Others?
Antonio Accetturo (),
Valter Di Giacinto (),
Giacinto Micucci and
Marcello Pagnini ()
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Giacinto Micucci: Bank of Italy, Italy
Working Paper series from Rimini Centre for Economic Analysis
Two main hypotheses are usually put forward to explain the productivity advantages of larger cities: agglomeration economies and firm selection. Combes et al. (2012) propose an empirical approach to disentangle these two effects and fail to find any impact of selection on local productivity differences. We theoretically show that selection effects do emerge when asymmetric trade and entry costs and different spatial scale at which agglomeration and selection may work are properly taken into account. The empirical findings confirm that agglomeration effects play a major role. However, they also show a substantial increase in the importance of the selection effect when asymmetric trade costs and a different spatial scale are taken into account.
Keywords: agglomeration economies; firm selection; market size; entry costs; openness to trade (search for similar items in EconPapers)
JEL-codes: C52 R12 D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eff, nep-geo, nep-int, nep-opm and nep-ure
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Journal Article: Geography, productivity, and trade: Does selection explain why some locations are more productive than others? (2018)
Working Paper: Geography, productivity and trade: does selection explain why some locations are more productive than others? (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:24_13
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