Footloose Capital, Market Access, and the Geography of Regional State Aid
AbstractThe global welfare implications of home market effects in trade models with imperfect competition are little understood. This paper proposes a simple model in which such implications can be easily analyzed. It shows an overall tendency of imperfectly competitive sectors to inefficiently cluster in locations that offer market access advantages. The more so the stronger the market power of firms as well as the intensity of increasing returns to scale and the lower the trade costs. As such features are likely to di¤er widely across sectors, those results provide theoretical ground to the promotion of regional policies that are also sector-specific and not only region-specific as currently in the EU.
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Bibliographic InfoPaper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 155.
Date of creation: 01 May 2001
Date of revision:
economic integration; specialization; home market effect; regional disparities; regional policy;
Other versions of this item:
- Ottaviano, Gianmarco I. P., 2001. "Footloose capital, market access, and the geography of regional state aid," HWWA Discussion Papers 132, Hamburg Institute of International Economics (HWWA).
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
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