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The role of cities: evidence from the placement of sales offices

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  • Thomas J. Holmes

Abstract

What is the force of attraction of cities? Leading explanations include the advantages of a concentrated market and knowledge spillovers. This paper develops a model of firm location decisions in which it is possible to distinguish the importance of the concentrated-market motive from other motives, including knowledge spillovers. A key aspect of the model is that it allows for the firm to choose multiple locations. The theory is applied to study the placement of manufacturing sales offices. The implications of the concentrated-market motive are found to be a salient feature of U.S. Census micro data. The structural parameters of the model are estimated. The concentrated-market motive is found to account for approximately half of the concentration of sales offices in large cities.

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  • Thomas J. Holmes, 2002. "The role of cities: evidence from the placement of sales offices," Staff Report 298, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:298
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    Cited by:

    1. Steven Berry & Joel Waldfogel, 2010. "Product Quality And Market Size," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 1-31, March.
    2. Thomas J. Holmes, 2004. "Step-by-step Migrations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 52-68, January.
    3. No, Angela, 2008. "Cities and Growth: Knowledge Spillovers in the Adoption of Advanced Manufacturing Technologies," The Canadian Economy in Transition 2008018e, Statistics Canada, Economic Analysis Division.
    4. Yakovlev, Andrey A. (Яковлев, Андрей А.) & Freinkman, Lev M. (Фрейнкман, Лев М.) & Makarov, Sergey A. (Макаров, Сергей А.) & Pogodaev, Victor S. (Погодаев, Виктор С.), 2018. "The Elite Consensus and Regional Economic Development: The Experience of the Republic of Tatarstan [Элитный Консенсус И Экономическое Развитие Региона: Опыт Республики Татарстан]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 180-217, February.
    5. Rahul Govind & Rabikar Chatterjee & Vikas Mittal, 2018. "Segmentation of Spatially Dependent Geographical Units: Model and Application," Management Science, INFORMS, vol. 64(4), pages 1941-1956, April.

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    Keywords

    Economies of scale; Cities and towns;

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