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Input–Output Linkages, Proximity to Final Demand and the Location of Manufacturing Industries

In: Geography, Institutions and Regional Economic Performance

Author

Listed:
  • Giordano Mion

    (London School of Economics (lse), UK cep, London, UK and cepr)

Abstract
In this chapter I develop an empirical framework to estimate the role of agglomeration externalities, especially those stemming from input–output linkages, in the location process of US manufacturing plants. Furthermore, drawing on the model of Holmes and Stevens (J Econ Geogr 4: 227–250, 2004b), I propose a way to reconcile some previous puzzling results about proximity to consumers’ demand and the scope of agglomeration forces. Results suggest that flows of intermediate goods have a positive impact, especially for big plants, on local specialization. By contrast, consumers’ demand has a negative effect and this result is consistent with theory. However, the majority of both effects comes from very local interactions with spatial spill-overs being quite weak but with a very large geographical scope. This result suggests some kind of strong non-linearity in the underlying spatial process. Very close interactions are extremely important but, when considering what is beyond the limit of local markets, then distance does not matter so much.

Suggested Citation

  • Giordano Mion, 2013. "Input–Output Linkages, Proximity to Final Demand and the Location of Manufacturing Industries," Advances in Spatial Science, in: Riccardo Crescenzi & Marco Percoco (ed.), Geography, Institutions and Regional Economic Performance, edition 127, pages 237-262, Springer.
    • Handle: RePEc:spr:adspcp:978-3-642-33395-8_12
    DOI: 10.1007/978-3-642-33395-8_12
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    References listed on IDEAS

    as
    1. Thomas J. Holmes & John J. Stevens, 2004. "Geographic concentration and establishment size: analysis in an alternative economic geography model," Journal of Economic Geography, Oxford University Press, vol. 4(3), pages 227-250, June.
    2. H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
    3. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Firms in the European Union," Post-Print hal-00267438, HAL.
    4. Mion, Giordano, 2004. "Spatial externalities and empirical analysis: the case of Italy," Journal of Urban Economics, Elsevier, vol. 56(1), pages 97-118, July.
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    11. Holmes, Thomas J. & Stevens, John J., 2004. "Spatial distribution of economic activities in North America," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 63, pages 2797-2843, Elsevier.
    12. Keith Head & Thierry Mayer, 2004. "Market Potential and the Location of Japanese Investment in the European Union," The Review of Economics and Statistics, MIT Press, vol. 86(4), pages 959-972, November.
    13. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 857-880.
    14. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, April.
    15. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    16. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 377-393, May.
    17. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, vol. 89(2), pages 311-316, May.
    18. Russell Hillberry & David Hummels, 2002. "Explaining Home Bias in Consumption: The Role of Intermediate Input Trade," NBER Working Papers 9020, National Bureau of Economic Research, Inc.
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    21. LAFOURCADE, Miren & MION, Giordano, 2003. "Concentration, spatial clustering and the size of plants : disentangling the sources of co-location externalities," LIDAM Discussion Papers CORE 2003091, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Paul Courtney & Denis Lépicier & Bertrand Schmitt, 2005. "Rural firms, farms and the local economy - a focus on small and medium-sized towns," ERSA conference papers ersa05p128, European Regional Science Association.
    2. Paul Courtney & Denis L�picier & Bertrand Schmitt, 2008. "Spatial Patterns of Production Linkages in the Context of Europe's Small Towns: How Are Rural Firms Linked to the Local Economy?," Regional Studies, Taylor & Francis Journals, vol. 42(3), pages 355-374, April.

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    More about this item

    Keywords

    Manufacturing concentration; Input–output linkages; Agglomeration externalities; Market proximity;
    All these keywords.

    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R34 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Input Demand Analysis

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