How do Producer Services Affect the Location of Manufacturing Firms? The Role of Information Accessibility

Abstract

The aim of this paper is to analyze the location decisions both of producer services and of manufacturing, exploring two main topics: how manufacturing and services location change when regions integrate, and how developments in telecommunications affect them both. We built a theoretical model consisting of two regions and three sectors (manufacturing, producer services, and agriculture). Given that producer services constitute a sector oriented towards information and knowledge, this is a factor that is taken into account in the explanation of their location. Numerical simulations are made in a general equilibrium framework. In contrast to previous works, we find that when regions integrate, specialization (producer services being in the core regions, and manufacturing in the periphery)—rather than convergence—arises. Besides, improvements in telecommunications may facilitate concentration of services in the core regions.