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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 spread across regions to meet final consumer demand. As transport costs fall, increasing returns interacting with labour mobility and/or input-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 workers do not move across regions, further reductions in transport costs make firms increasingly sensitive to wage differentials, and may lead industry to spread out again.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1575.

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Date of creation: Feb 1997
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Handle: RePEc:cpr:ceprdp:1575

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Related research

Keywords: Agglomeration; Linkages; Migration; Regional Integration;

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References

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  1. 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.
  2. Gordon H. Hanson, 1994. "Regional Adjustment to Trade Liberalization," NBER Working Papers 4713, National Bureau of Economic Research, Inc.
  3. 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.
  4. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, 08.
  5. Grandmont, Jean-Michel, 2008. "Nonlinear difference equations, bifurcations and chaos: An introduction," Research in Economics, Elsevier, vol. 62(3), pages 122-177, September.
  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. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
  8. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  9. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  10. 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.
  11. repec:fth:iniesr:430 is not listed on IDEAS
  12. 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.
  13. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  14. Helpman, E., 1995. "The Size of Regions," Papers 14-95, Tel Aviv.
  15. 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.
  16. 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.
  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. Bentolila, Samuel & Jimeno, Juan Francisco, 1995. "Regional Unemployment Persistence (Spain, 1976-94)," CEPR Discussion Papers 1259, C.E.P.R. Discussion Papers.
  19. 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.
  20. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  21. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  22. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
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