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

Author(s): Javier Barbero, Kristian Behrens and Jose L. Zofio

Publication Date: February 2015

Keyword(s): generalized transport costs, industry location, size, trading networks and wages

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Barbero, J, Behrens, K and Zofio, J. 2015. 'Industry location and wages: The role of market size and accessibility in trading networks'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10411