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The rise and fall of regional inequalities

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  • Puga, Diego

Abstract

This paper analyses how the degree of regional integration affects regional differences in production structures and income levels. With high transport costs, industry is spead across regions to meet final consumer demad. As transport costs fall, increasing returns interacting with labour mobility and/or inout-output linkages between firms create a tendency for the agglomeration of increasing returns activities. When workers migrate towards locations with more firms and higher real wages, this intensifies agglomeration. When instead workers do not move across regions, further reductions in transport costs make firms increasingly sensitive to wage differentials, leading industry to spread out again.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 43 (1999)
Issue (Month): 2 (February)
Pages: 303-334

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Handle: RePEc:eee:eecrev:v:43:y:1999:i:2:p:303-334

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  1. Puga, Diego & Venables, Anthony J., 1997. "Preferential trading arrangements and industrial location," Journal of International Economics, Elsevier, vol. 43(3-4), pages 347-368, November.
  2. Bentolila, Samuel & Jimeno, Juan Francisco, 1995. "Regional Unemployment Persistence (Spain, 1976-94)," CEPR Discussion Papers 1259, C.E.P.R. Discussion Papers.
  3. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
  4. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  5. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  6. Fujita, Masahisa & Thisse, Jacques-Francois, 1996. "Economics of Agglomeration," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 339-378, December.
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  8. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  9. Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 440-464, December.
  10. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
  11. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
  12. Grandmont, Jean-Michel, 2008. "Nonlinear difference equations, bifurcations and chaos: An introduction," Research in Economics, Elsevier, vol. 62(3), pages 122-177, September.
  13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  14. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
  15. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  16. Ottaviano, Gianmarco Ireo Paolo & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  17. Diego Puga, 1996. "Urbanisation Patterns: European vs Less Developed Countries," CEP Discussion Papers dp0305, Centre for Economic Performance, LSE.
  18. repec:fth:iniesr:430 is not listed on IDEAS
  19. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
  20. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
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