The spread of industry: spatial agglomeration in economic development

This paper describes the spread of industry from country to country as a region grows. All industrial sectors are initially agglomerated in one country, tied together by input-output links between firms. Growth expands industry more than other sectors, bidding up wages in the country in which industry is clustered. At some point firms start to move away, and when a critical mass is reached industry expands into another country, raising wages there. We establish the circumstances in which industry spills over, which sectors move out first, and which are more important in triggering a critical mass. J. Japan. Int. Econ., December 1996, 10(4), pp. 440-464. Centre for Economic Performance, London School of Economics; and London School of Economics and Centre for Economic Policy Research.