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Industry location and wages: The role of market size and accessibility in trading networks

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  • Zofio, Jose L.
  • Behrens, Kristian
  • Barbero, Javier

Abstract

We investigate the geographical distribution of economic activity and wages in a general equilibrium model with many asymmetric regions and costly trade. As shown by extensive simulations on random networks, local market size better explains a region?s industry share, whereas accessibility better explains a region?s wage. The correlation between equilibrium wages and industry shares is low, thus suggesting that the two variables operate largely independently. The model replicates well the spatial distribution of industry using Spanish data, yet overpredict changes in that distribution due to changes in 'generalized transport costs'. The latter had only small impacts on changes in the geographical distribution of economic activity in Spain from 1980 to 2007.

Suggested Citation

  • Zofio, Jose L. & Behrens, Kristian & Barbero, Javier, 2015. "Industry location and wages: The role of market size and accessibility in trading networks," CEPR Discussion Papers 10411, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10411
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    Cited by:

    1. Álvarez, Inmaculada C. & Barbero, Javier & Rodríguez-Pose, Andrés & Zofío, José L., 2018. "Does Institutional Quality Matter for Trade? Institutional Conditions in a Sectoral Trade Framework," World Development, Elsevier, vol. 103(C), pages 72-87.
    2. Persyn, Damiaan & Díaz-Lanchas, Jorge & Barbero, Javier, 2022. "Estimating road transport costs between and within European Union regions," Transport Policy, Elsevier, vol. 124(C), pages 33-42.
    3. Egger, Peter H. & Kaynak, Pinar & Zoller-Rydzek, Benedikt, 2020. "Indirect effects of trade shocks on Turkish local labor markets," Regional Science and Urban Economics, Elsevier, vol. 83(C).
    4. Nuria Gallego & José L. Zofío, 2018. "Trade Openness, Transport Networks and the Spatial Location of Economic Activity," Networks and Spatial Economics, Springer, vol. 18(1), pages 205-236, March.
    5. Ryo Itoh & Zonghui Li, 2021. "Effects of dual networks on tax strategies: geography and transaction," The Japanese Economic Review, Springer, vol. 72(1), pages 97-128, January.
    6. Thisse, Jacques-François & Proost, Stef, 2015. "Skilled Cities, Regional Disparities, and Efficient Transport: The state of the art and a research agenda," CEPR Discussion Papers 10790, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Size; Industry location; Trading networks; Wages; Generalized transport costs;
    All these keywords.

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • 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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