Finance and Economics Discussion Series (FEDS)
April 2002
Geographic Concentration and Establishment Size: Analysis in an Alternative Economic Geography Model
Thomas J. Holmes and John J. Stevens
Abstract:
Big cities specialize in services rather than manufacturing. Big-city establishments in services are larger than the national average while those in manufacturing are smaller. This paper proposes an explanation of these and other facts. The theory is developed in an economic geography model that is an alternative to the standard Dixit-Stiglitz structure. In our tractable structure that has potentially wider application, firms have monopoly power in local markets, but are price takers in export markets.
Keywords: Geographic concentration, establishment size, transportation costs
PDF: Full Paper
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