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Economic Integration and Agglomeration in a Middle Product Economy

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  • Peng, Shin-Kun
  • Thisse, Jacques-François
  • Wang, Ping

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

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Citations

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Cited by:
  1. Berliant, Marcus & Wang, Ping, 2003. "Dynamic Urban Models: Agglomeration and Growth," Working Papers 1167, California Institute of Technology, Division of the Humanities and Social Sciences.
  2. Kanemoto, Yoshitsugu, 2013. "Second-best cost–benefit analysis in monopolistic competition models of urban agglomeration," Journal of Urban Economics, Elsevier, vol. 76(C), pages 83-92.
  3. Fujishima, Shota, 2013. "Growth, agglomeration, and urban congestion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1168-1181.
  4. José Pedro Pontes, 2009. "Vertical Linkages and Multinational Plant Size," Working Papers Department of Economics 2009/30, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  5. Yoshitsugu Kanemoto, 2012. "Cost-Benefit Analysis in Monopolistic Competition Models of Urban Agglomeration," GRIPS Discussion Papers 12-04, National Graduate Institute for Policy Studies.
  6. Kanemoto, Yoshitsugu, 2013. "Evaluating benefits of transportation in models of new economic geography," Economics of Transportation, Elsevier, vol. 2(2), pages 53-62.
  7. Angus C. Chu & Shin-Kun Peng, 2009. "International Intellectual Property Rights: Effects on Growth, Welfare and Income Inequality," IEAS Working Paper : academic research 09-A006, Institute of Economics, Academia Sinica, Taipei, Taiwan.
  8. Larrosa, Juan MC, 2007. "Optimal growth with intermediate goods interdependence: A difference game approach," MPRA Paper 4675, University Library of Munich, Germany.
  9. Hsu, Wen-Tai & Wang, Ping, 2012. "Trade, firm selection, and industrial agglomeration," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 975-986.
  10. José Pedro Pontes, 2008. "Location of Upstream and Downstream Industries," Working Papers Department of Economics 2008/30, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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