Pontes, José Pedro2010-12-092010-12-092006Pontes, José Pedro. (2006). "Agglomeration and comparative advantage in vertically-related firms". Instituto Superior de Economia e Gestão - DE Working papers nº 17-2006/DE/UECE0874-4548http://hdl.handle.net/10400.5/2638This paper models, in game-theoretical terms, the location of two vertically-linked monopolistic firms in a spatial economy formed by a large, high labor cost country and a relatively small, low labor cost country. It is found that the decrease in transport costs shifts firms towards the low production cost country. This process takes two different forms: in labor-intensive industries it leads to spatial fragmentation; in industries with strong input-output relations, agglomerations are conserved, although they shift toward the low labor cost country.engLocationIntermediate GoodsAgglomerationComparative Advantageworking paper