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WHICH FIRMS ARE LEFT IN THE PERIPHERY? SPATIAL SORTING OF HETEROGENEOUS FIRMS WITH SCALE ECONOMIES IN TRANSPORTATION
Author(s) -
Forslid Rikard,
Okubo Toshihiro
Publication year - 2015
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/jors.12115
Subject(s) - relocation , economies of scale , productivity , sorting , economic geography , scale (ratio) , core (optical fiber) , economies of agglomeration , business , liberalization , economics , industrial organization , market economy , geography , microeconomics , macroeconomics , materials science , cartography , computer science , composite material , programming language
This paper introduces scale 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. In contrast 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 liberalization leads to a gradual relocation to the core with the most productive firms remaining in the periphery.