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Integration, Fragmentation and the Geography of Welfare

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  • Barbara Dluhosch

Abstract

The welfare effects of trade integration with endogenous production technology are examined in a monopolistic competition framework. In addition to explaining industry location, trade patterns and accompanying effects on local welfare, the analysis highlights the endogenous change in the costs of supervising fragmented production when economies open up to trade. By regarding fragmentation as a skill‐intensive activity, factor proportions (rather than size) strongly affect the international distribution of gains from trade. Nevertheless, albeit not generally, for a wide range of parameter values, even a skill‐poor country can participate in the gains—despite loss of industry.

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  • Barbara Dluhosch, 2006. "Integration, Fragmentation and the Geography of Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(3), pages 459-479, October.
    • Handle: RePEc:bla:scandj:v:108:y:2006:i:3:p:459-479
    DOI: 10.1111/j.1467-9442.2006.00466.x
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    References listed on IDEAS

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    1. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
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    Cited by:

    1. Petrakos, George & Dimitris, Kallioras & Ageliki, Anagnostou, 2007. "A Generalized Model of Regional Economic Growth in the European Union," Papers DYNREG12, Economic and Social Research Institute (ESRI).

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