Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129496
Authors: 
Dalvai, Wilfried
Year of Publication: 
2016
Series/Report no.: 
Thünen-Series of Applied Economic Theory 145
Abstract: 
Worldwide trade flows are dominated by high-productivity firms, that have a large range of products. Since the product range of firms reflects partly trade flows, it is a source of economic differences in space. In this paper, I analyze the effects of the product mix of firms on agglomeration. I build a theoretical model of multiproduct firms à la Mayer, Melitz, and Ottaviano (2014, AER), expand it with skilled, mobile workers and a spatial equilibrium. I show that a larger product mix of firms in a region favours dispersion. The product mix influences the indirect utility through two channels, the wage and consumer surplus. A larger product mix decreases the wage differential between the two regions through a more competitive environment and thus strengthening the dispersion force. More competition means less profits and therefore a lower wage for skilled workers. On the other hand a more competitive environment means a higher consumer surplus which diminishes agglomeration forces.
Subjects: 
Agglomeration
Heterogenous Firms
Product Mix
Migration
JEL: 
L11
F12
R11
R12
Document Type: 
Working Paper

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