Which Firms are Left in the Periphery? Spatial Sorting of Heterogeneous Firms with Scale Economies in Transportation

15 Pages Posted: 13 Jan 2015

See all articles by Rikard Forslid

Rikard Forslid

Stockholm University; Centre for Economic Policy Research (CEPR)

Toshihiro Okubo

Keio University

Multiple version iconThere are 2 versions of this paper

Date Written: January 2015

Abstract

This paper introduces scale economies in transportation in a trade and geography model with heterogeneous firms. This relatively small change to the standard model produces a new pattern of spatial sorting among firms. In contrast to the existing literature, our model produces the result that firms of intermediate productivity relocate to the large core region, whereas high‐ and low‐productivity firms remain in the periphery. Trade liberalization leads to a gradual relocation to the core with the most productive firms remaining in the periphery.

Suggested Citation

Forslid, Rikard and Okubo, Toshihiro, Which Firms are Left in the Periphery? Spatial Sorting of Heterogeneous Firms with Scale Economies in Transportation (January 2015). Journal of Regional Science, Vol. 55, Issue 1, pp. 51-65, 2015. Available at SSRN: https://ssrn.com/abstract=2548810 or http://dx.doi.org/10.1111/jors.12115

Rikard Forslid (Contact Author)

Stockholm University ( email )

Universitetsvägen 10 A
House A, floor 4 and 7
Frescati, Stockholm
Sweden
+46 8 16 3096 (Phone)
+46 8 15 9482 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Toshihiro Okubo

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

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