Firms' Location Choice with Agglomeration Externalities
Yu Binbin1,Liu Jiheng2
1.School of Economics and Management of Zhejiang Sci-Tech University,Hangzhou 310000,China; 2.China Agricultural University College of Economics & Management,Beijing 100083,China
Abstract：This paper builds a two regional business location choice model through the technical processing for externalities in order to analyze the impact mechanism of externalities to firms' location choice.Study finds that monetary externalities has obvious discrete effects on firms’ location choice,and technological externalities has a strong promotion effect on firms' agglomeration.The positive effects of technological externalities to be significantly greater than the negative effects of monetary externalities,resulting in firms' agglomeration being the optimal strategy.Through the dynamics analysis of firms' location we find that firm heterogeneity,especially technology heterogeneity,is an important power source of firms' location choice,while the mechanism of action is effects of competition and selection.The conclusion of the study raises important enlightenment on the transfer and upgrade of industries in regional economic development.
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