Essay on Geography of Production

Economic activities are unevenly distributed in space. The economic literature has extensively investigated the potential reasons behind the emergence of cities and local specializa- tion, on one hand, and foreign trade and investment patterns, on the other. These essays aim to analyze some of the compo- nents explaining the spatial variation of economic activities, leveraging an extensive amount of firm-level data. First, I in- vestigate the interplay between regional productivity dispari- ties and local agglomeration advantages. Although I find evi- dence for agglomeration advantages stemming within Italian firms’ clusters, I find them to be much smaller than the pro- ductivity premium for firms located in northern Italy. Sec- ond, I investigate the rationale for the ownership chains de- veloped by multinational enterprises across different national borders. Based on the insight that the placement of subsidiaries along ownership chains is driven by the existence of commu- nication costs to transmit management decisions, I develop a theoretical model for corporate control where parent com- panies can delegate monitoring activities to middlemen sub- sidiaries that are located in intermediate jurisdictions. I de- rive a two-step empirical strategy enabling the structural es- timation of a gravity equation for foreign investments. Third, I investigate the ability of European Union regions to retain foreign investments, evaluating how crucial regional charac- teristics, such as an R&D-friendly economic environment and good local institutions, affect the life duration of companies targeted by foreign investments.