Economic Geography and Wages: The Case of Indonesia

32 Pages Posted: 15 Feb 2006

See all articles by Mary Amiti

Mary Amiti

International Monetary Fund (IMF) - Trade Unit; University of Melbourne - Department of Economics; Centre for Economic Policy Research (CEPR)

Lisa A. Cameron

University of Melbourne - Melbourne Institute: Applied Economic & Social Research; IZA Institute of Labor Economics; J-PAL

Date Written: May 2004

Abstract

This paper estimates the agglomeration benefits that arise from vertical linkages between firms. 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 capture spatial input/output linkages more accurately 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, vertical linkages, economic geography, cost linkages, demand linkages

JEL Classification: F1, L6, R1

Suggested Citation

Amiti, Mary and Cameron, Lisa A., Economic Geography and Wages: The Case of Indonesia (May 2004). IMF Working Paper No. 04/79, Available at SSRN: https://ssrn.com/abstract=878902

Mary Amiti (Contact Author)

International Monetary Fund (IMF) - Trade Unit ( email )

700 19th Street NW
Washington, DC 20431
United States
202-986-3572 (Phone)
202-589-7767 (Fax)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia
+61 3 8344 7652 (Phone)
+61 3 8344 6899 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Lisa A. Cameron

University of Melbourne - Melbourne Institute: Applied Economic & Social Research ( email )

Level 5, FBE Building, 111 Barry Street
Parkville, Victoria 3010
Australia

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=744

J-PAL ( email )

66 bis avenue Jean Moulin
Paris, 75014
France

HOME PAGE: http://www.povertyactionlab.org/cameron

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
105
Abstract Views
1,195
rank
356,488
PlumX Metrics