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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2013:9:
Which Firms are Left in the Periphery? - Spatial Sorting of Heterogeneous Firms with Scale Economies in Transportation

Rikard Forslid and Toshihiro Okubo ()

Abstract: This paper introduces scale economies or density 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. Contrary 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 liberalisation leads to a gradual relocation to the core, with the most productive firms remaining in the periphery.

Keywords: heterogeneous …firms; transportation costs; scale economies; (follow links to similar papers)

JEL-Codes: F12; F15; (follow links to similar papers)

16 pages, April 17, 2013

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