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Economic Integration and Agglomeration in a Middle Product Economy

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Author Info
Peng, Shin-Kun
Thisse, Jacques-François
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 intermediate good inputs. Capital is immobile and 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4441.

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Date of creation: Aug 2004
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Handle: RePEc:cpr:ceprdp:4441

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Related research
Keywords: agglomeration economic integration growth intermediate goods trade

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Find related papers by JEL classification:
D90 - Microeconomics - - Intertemporal Choice and Growth - - - General
F15 - International Economics - - Trade - - - Economic Integration
O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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  1. Marcus Berliant & Ping Wang, 2004. "Dynamic Urban Models: Agglomeration and Growth," Urban/Regional 0404006, EconWPA. [Downloadable!]
    Other versions:
  2. Larrosa, Juan MC, 2007. "Optimal growth with intermediate goods interdependence: A difference game approach," MPRA Paper 4675, University Library of Munich, Germany. [Downloadable!]
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