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Economic integration and agglomeration in a middle product economy

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Author Info
PENG, Shin-Kun
THISSE, Jacques-Franois
WANG, Ping

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Abstract

The paper examines the interactions between economic integration and population agglomeration in a middle product economy displaying neoclassical growth. There are two vertically integrated economies. Each consists of a large number of final good competitive firms operating plants in both regions, and a large number of intermediate goods monopolistically competitive firms operating each in only one region. While immobile workers are employed with intermediate goods to produce the final good, mobile workers are used to design the line of differentiated intermediategood inputs. Capital is immobile, the final good is non-traded, whereas the intermediate goods are traded. We find that employment agglomeration and output growth need not be positively related. Furthermore, trade is not necessarily beneficial to regional growth, whereas trade between the two regions need not be associated with a widened skilled-unskilled wage gap.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004015.

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Date of creation: 01 Apr 2004
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Handle: RePEc:cor:louvco:2004015

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Related research
Keywords: economic integration; agglomeration; intermediate goods trade; growth;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Baldwin, Richard E. & Martin, Philippe, 2004. "Agglomeration and regional growth," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 60, pages 2671-2711 Elsevier. [Downloadable!] (restricted)
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  2. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796 Elsevier. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Eric W. Bond & Kathleen Trask & Ping Wang, 2003. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1041-1060, 08. [Downloadable!] (restricted)
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  5. Sanyal, Kalyan K & Jones, Ronald W, 1982. "The Theory of Trade in Middle Products," American Economic Review, American Economic Association, vol. 72(1), pages 16-31, March. [Downloadable!] (restricted)
  6. Jeffrey A. Frankel & David Romer, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June. [Downloadable!] (restricted)
  7. Xie, Danyang, 1998. "An Endogenous Growth Model with Expanding Ranges of Consumer Goods and Producer Durables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 439-60, May.
  8. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  9. Stokey, Nancy L, 1991. "The Volume and Composition of Trade between Rich and Poor Countries," Review of Economic Studies, Blackwell Publishing, vol. 58(1), pages 63-80, January. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
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  11. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February. [Downloadable!] (restricted)
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  12. Marcus Berliant & Ping Wang, 2004. "Dynamic Urban Models: Agglomeration and Growth," Urban/Regional 0404006, EconWPA. [Downloadable!]
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  13. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October. [Downloadable!] (restricted)
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  14. Rivera-Batiz, Luis A & Romer, Paul M, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 531-55, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. José Pedro Pontes, 2008. "Location of Upstream and Downstream Industries," Working Papers 2008/30, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  2. Larrosa, Juan MC, 2007. "Optimal growth with intermediate goods interdependence: A difference game approach," MPRA Paper 4675, University Library of Munich, Germany. [Downloadable!]
  3. José pedro Pontes, . "Vertical Linkages and Multinational Plant Size," Working Papers 2009/30, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  4. Marcus Berliant & Ping Wang, 2004. "Dynamic Urban Models: Agglomeration and Growth," Urban/Regional 0404006, EconWPA. [Downloadable!]
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