Working Paper Series
Trade and Location with Horizontal and Vertical Multi-Region Firms
() and Rikard Forslid
Abstract: This paper analyses the effect on agglomeration tendencies
of allowing firms to become multi-region firms in a standard model of trade
and location. More specifically, we introduce horizontal and vertical
multi-region firms into the core-periphery (CP) model developed by Krugman
(1991). The introduction of horizontal multi-region firms dampens the
strong agglomeration effects found in the CP model by making the range of
trade costs for which the core-periphery equilibrium occurs smaller. The
introduction of vertical multi-region firms that can separate the location
of headquarter activities from the location of production has two
counteracting effects. First, headquarters have a strong tendency to
agglomerate, and, in this sence, agglomeration tendencies are strengthened.
Second, actual production tends to be more spread out, and, in this sense,
they are weakened.
Keywords: Trade; Location; Agglomeration; Multinational firms; (follow links to similar papers)
JEL-Codes: F12; F15; R12; (follow links to similar papers)
35 pages, October 1, 1998
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- This paper is forthcoming as:
Ekholm, Karolina and Rikard Forslid, 'Trade and Location with Horizontal and Vertical Multi-Region Firms', Scandinavian Journal of Economics.
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