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The Rise and Fall of Regional Inequalities

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  • Diego Puga

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

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0314.

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Date of creation: Nov 1996
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Handle: RePEc:cep:cepdps:dp0314

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  3. Grandmont Jean-michel, 1988. "Nonlinear difference equations bifurcations and chaos : an introduction," CEPREMAP Working Papers (Couverture Orange) 8811, CEPREMAP.
  4. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
  5. 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.
  6. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
  7. Diego Puga, 1996. "Urbanisation patterns: European vs less developed countries," LSE Research Online Documents on Economics 20656, London School of Economics and Political Science, LSE Library.
  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  9. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
  10. Gordon H. Hanson, 1994. "Regional Adjustment to Trade Liberalization," NBER Working Papers 4713, National Bureau of Economic Research, Inc.
  11. repec:fth:iniesr:430 is not listed on IDEAS
  12. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  13. 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.
  14. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  15. Puga, Diego & Venables, Anthony J., 1995. "Preferential Trading Arrangements and Industrial Location," CEPR Discussion Papers 1309, C.E.P.R. Discussion Papers.
  16. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  17. 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.
  18. 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.
  19. Helpman, E., 1995. "The Size of Regions," Papers 14-95, Tel Aviv.
  20. 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.
  21. Bentolila, Samuel & Jimeno, Juan Francisco, 1995. "Regional Unemployment Persistence (Spain, 1976-94)," CEPR Discussion Papers 1259, C.E.P.R. Discussion Papers.
  22. 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.
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