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Trade liberalisation and agglomeration with firm heterogeneity: Forward and backward linkages

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  • Okubo, Toshihiro

Abstract

This paper studies the impact of trade cost reductions on the geographical concentration of manufacturing in the presence of intermediate input linkages, firm heterogeneity and fixed export costs. The presence of non-exporting firms in this Melitz-like model hampers full agglomeration by weakening the forward and backward linkages and fortifying market-crowding effect. Gradual trade liberalisation causes gradual agglomeration rather than the catastrophic agglomeration that economic geography models have long suggested. Also, trade liberalisation produces divergent welfare effects with the periphery losing and the core gaining; even costless trade fails to equalise welfare in the core and periphery due to non-exported intermediate inputs.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 39 (2009)
Issue (Month): 5 (September)
Pages: 530-541

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Handle: RePEc:eee:regeco:v:39:y:2009:i:5:p:530-541

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Keywords: Heterogeneous firms Economic geography Gradual agglomeration;

References

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Citations

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Cited by:
  1. Kristian Behrens & Frédéric Robert-Nicoud, 2008. "Survival of the Fittest in Cities: Agglomeration, Selection, and Polarisation," CEP Discussion Papers dp0894, Centre for Economic Performance, LSE.
  2. Maximilian Von Ehrlich & Tobias Seidel, 2012. "More Similar Firms - More Similar Regions? On the Role of Firm Heterogeneity for Agglomeration," CESifo Working Paper Series 4028, CESifo Group Munich.
  3. Forslid, Rikard & Okubo, Toshihiro, 2013. "Which Firms are Left in the Periphery? - Spatial Sorting of Heterogeneous Firms with Scale Economies in Transportation," Research Papers in Economics 2013:9, Stockholm University, Department of Economics.
  4. Richard Baldwin & Toshihiro Okubo, 2011. "International Trade, Offshoring and Heterogeneous Firms," NBER Working Papers 16660, National Bureau of Economic Research, Inc.
  5. Kristian Behrens & Frédéric Robert-Nicoud, 2009. "Survival of the Fittest in Cities: Agglomeration, Polarization, and Income Inequality," Cahiers de recherche 0919, CIRPEE.
  6. Toshihiro Okubo, 2012. "Antiagglomeration Subsidies With Heterogeneous Firms," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 285-299, 05.
  7. Churen Sun & Zhihao Yu & Tao Zhang, 2012. "Agglomeration, Productivity, and Firms¡® Exports: Evidence from Chinese Firm-level Data," ERSA conference papers ersa12p882, European Regional Science Association.
  8. Richard E. Baldwin & Toshihiro Okubo, 2014. "Tax Competition with Heterogeneous Firms," CAMA Working Papers 2014-36, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  9. Sun, Churen & Yu, Zhihao & Zhang, Tao, 2012. "Agglomeration and Trade with Heterogeneous Firms," MPRA Paper 49001, University Library of Munich, Germany, revised 17 Aug 2013.

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