A Dynamic Firm Location Choice Model with Agglomeration Externalities
نویسنده
چکیده
This paper outlines a dynamic model of firm location choice, in an environment which includes both agglomeration effects and stochastic productivity shocks. The model follows closely the methods of Hopenhayn (1992) and his treatment of firm level entry and exit decisions. However, this model adds the complexity of a second location, as well as the existence of spillover effects, or agglomeration externalities. Agglomeration externalities occur when firms get benefits from being located close to other firms. These externalities, in theory, are due to knowledge spillovers, labor pool sharing, or proximity of complementary activities.
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