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Yuhei MIYAUCHI (Boston University) – "Matching and Agglomeration: Theory and Evidence from Japanese Firm-to-Firm Trade "
Time: 03:00 pm – 4:00 pm
Date: 13rd of April 2021
Yuhei MIYAUCHI (Boston University) – “Matching and Agglomeration: Theory and Evidence from Japanese Firm-to-Firm Trade ”
Abstract: This paper studies how increasing returns to scale (IRS) in firm-to-firm matching in input trade shapes the agglomeration of economic activity. This paper studies the microfoundation of the agglomeration of economic activity through increasing returns to scale (IRS) in firm-to-firm matching in input trade. Using a yearly panel of firm-to-firm trade in Japan, I document that firms gradually match with an alternative supplier after an unanticipated supplier bankruptcy; these rematching rates increase in the geographic density of alternative suppliers; and they do not decrease in the geographic density of other buyers. Motivated by these findings, I develop a quantitative spatial equilibrium model of search and matching frictions in firm-to-firm input trade. By fitting the model to the reduced-form facts, I show that the increasing returns to scale in matching is as important as other agglomeration forces in explaining the geographic concentration of economic activity. In the counterfactuals for a reduction in cross-regional trade cost, misattributing these agglomeration mechanisms substantially biases the estimates of welfare gains.
Benoît SCHMUTZ (Pôle d’économie du CREST)
Anthony STRITTMATTER (Pôle d’économie du CREST)