Market Potential, Increasing Returns, and Geographic Concentration

  title={Market Potential, Increasing Returns, and Geographic Concentration},
  author={G. Hanson},
  • G. Hanson
  • Published 1998
  • Economics
  • In this paper, I examine the relationship between increasing returns to scale and the geographic concentration of economic activity. Using data on U.S. counties, I estimate the structural parameters of the Krugman (1991) model of economic geography. The specification I use, which is derived from the equilibrium conditions of the model, resembles a spatial labor demand function as it is proximity to consumer markets tha determines nominal wages and employment in a given location. Parameter… CONTINUE READING
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