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More Similar Firms - More Similar Regions? On the Role of Firm Heterogeneity for Agglomeration

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  • Maximilian von Ehrlich
  • Tobias Seidel

Abstract

In contrast to what several papers have argued recently, we show that firm heterogeneity fosters agglomeration of economic activity. If firms are more similar with respect to their total factor productivity, each company faces a lower propensity to export. This renders the home market more important speaking against agglomeration. We also relate changes in firm heterogeneity to technological progress which allows us to derive novel insights on the role of technology for the location of economic activity.

Suggested Citation

  • Maximilian von Ehrlich & Tobias Seidel, 2012. "More Similar Firms - More Similar Regions? On the Role of Firm Heterogeneity for Agglomeration," CESifo Working Paper Series 4028, CESifo.
    • Handle: RePEc:ces:ceswps:_4028
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    Cited by:

    1. von Ehrlich, Maximilian & Seidel, Tobias, 2015. "Regional implications of financial market development: Industry location and income inequality," European Economic Review, Elsevier, vol. 73(C), pages 85-102.
    2. Xi Yang & Dao‐Zhi Zeng, 2021. "Trade liberalisation with mobile capital and firm heterogeneity," The World Economy, Wiley Blackwell, vol. 44(2), pages 530-559, February.
    3. Hangtian Xu & Yiming Zhou, 2023. "Inter-industry trade and heterogeneous firms: country size matters," The Japanese Economic Review, Springer, vol. 74(1), pages 57-81, January.
    4. Fazio, Giorgio & Piacentino, Davide, 2018. "Convergence analysis for hierarchical longitudinal data," Economic Modelling, Elsevier, vol. 73(C), pages 89-99.
    5. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.

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    More about this item

    Keywords

    firm heterogeneity; agglomeration; technological change; trade; labor mobility;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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