Geography, Productivity, and Trade: Does Selection Explain Why Some Locations are More Productive than Others?

31 Pages Posted: 9 Nov 2018

Multiple version iconThere are 2 versions of this paper

Date Written: November 2018

Abstract

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 find no impact of selection on local productivity differences. We theoretically show that selection effects do emerge when heterogeneous trade costs and the different spatial scale at which agglomeration and selection may work are properly taken into account. Our empirical findings confirm that agglomeration effects play a major role. However, they also show a substantial increase in the importance of the selection effect.

Keywords: agglomeration economies, firm selection, market size, openness to trade, c52, r12, d24

Suggested Citation

Accetturo, Antonio and Di Giacinto, Valter and Micucci, Giacinto and Pagnini, Marcello, Geography, Productivity, and Trade: Does Selection Explain Why Some Locations are More Productive than Others? (November 2018). Journal of Regional Science, Vol. 58, Issue 5, pp. 949-979, 2018. Available at SSRN: https://ssrn.com/abstract=3281866 or http://dx.doi.org/10.1111/jors.12393

Antonio Accetturo (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Valter Di Giacinto

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Giacinto Micucci

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Marcello Pagnini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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