Article (Scientific journals)
Firms' locations under demand heterogeneity
Picard, Pierre M.; Okubo, Toshihiro
2012In Regional Science and Urban Economics, 42 (6), p. 961-974
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Keywords :
heterogeneous taste and quality; spatial selection; economic geography; agglomeration; home market effect.
Abstract :
[en] In this paper we build an economic geography model where rms sell product varieties with heterogenous demands. We show that rms selling the products with higher demands select to set up their plants in larger countries. Larger countries do not only get better access to more varieties but also to the most demanded and valuable ones. The impact of such a spatial selection on fi rms location choice depends on the skewness of the distribution of demand intensity across varieties. In a model where only capital moves across regions, demand heterogeneity generally diminishes the amount of capital invested in the larger country. In a model where the work force moves across regions, demand heterogeneity is shown to eliminate dramatic changes in the location patterns and to result in the asymmetric dispersion of workers, rather their symmetric dispersion or complete agglomeration in a specic region.
Disciplines :
Social economics
Author, co-author :
Picard, Pierre M. ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Okubo, Toshihiro
Language :
English
Title :
Firms' locations under demand heterogeneity
Publication date :
2012
Journal title :
Regional Science and Urban Economics
ISSN :
0166-0462
Publisher :
Elsevier Science
Volume :
42
Issue :
6
Pages :
961-974
Peer reviewed :
Peer Reviewed verified by ORBi
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since 10 December 2013

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