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In this paper, I examine the spatial correlation of wages and consumer purchasing power across U.S. counties to see whether regional product-market linkages contribute to spatial agglomeration. First, I estimate a simple market-potential function, which is a reduced form for several economic geography models. In this specification, proximity to consumer(More)
This chapter examines empirical strategies that have been or could be used to evaluate the importance of agglomeration and trade models. This theoretical approach, widely known as “New Economic Geography” (NEG), emphasizes the interaction between transport costs and firm-level scale economies as a source of agglomeration. NEG focuses on forward and backward(More)
We evaluate two alternative models of international trade in differentiated products. An increasing returns model where varieties are linked to firms predicts home market effects: increases in a country’s share of demand cause disproportionate increases in its share of output. In contrast, a constant returns model with national product differentiation(More)
As the exchange rate, foreign demand, production costs and export promotion policies evolve, manufacturing firms are continually faced with two issues: Whether to be an exporter, and if so, how much to export. We develop a dynamic structural model of export supply that characterizes these two decisions and estimate the model using plant-level panel data on(More)
In 1985 the European Commission diagnosed its member states as suffering from excessive market fragmentation, a state of affairs it later referred to as “Non-Europe.” In response, the European Union launched an ambitious program to unify its internal market by removing non-tariff barriers. We examine the empirical basis for the Commission’s diagnosis using(More)
Gravity Equations: Workhorse, Toolkit, and Cookbook* This chapter focuses on the estimation and interpretation of gravity equations for bilateral trade. This necessarily involves a careful consideration of the theoretical underpinnings since it has become clear that naive approaches to estimation lead to biased and frequently misinterpreted results. There(More)
We investigate the hypothesis that firms prefer to locate “where the markets are.” We use a theoretical model of location choice under imperfect competition to formalize this concept. The model yields a profit function incorporating a term closely connected to the market potential index introduced by Harris in 1954. The location decision is a function of(More)