Towards a « Spatialized » Cost of Capital Concept

  • Michel Mignolet
Part of the Advanced Studies in Theoretical and Applied Econometrics book series (ASTA, volume 35)


The economic literature has long been concerned with the location of productive activities in space. The investor is viewed as selecting the region that yields the highest expected value of after-tax profits. The firm considers, among others, the intrinsic characteristics of regions (the factor endowments) as well as any net agglomeration benefits1. By the clustering of activities, externalities are exploited that modify the comparative advantages of regions. Agglomeration economies add to the attractiveness of some locations2. However as firms congregate competition among users may bid up local factor prices (land, in particular) lowering the advantage of congested zones. The individual maximization decision also accounts for any subsidies granted in the different regions and the tax burden on the income from invested capital.


Total Factor Productivity Growth Agglomeration Economy Factor Endowment Land Price Production Function Approach 


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© Springer Science+Business Media Dordrecht 1998

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  • Michel Mignolet

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