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The rise and fall of regional inequalities

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  • Diego Puga

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

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File URL: http://eprints.lse.ac.uk/20643/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20643.

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Length: 39 pages
Date of creation: Nov 1996
Date of revision:
Handle: RePEc:ehl:lserod:20643

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Keywords: agglomeration; regional integration; migration; linkages;

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References

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  1. 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.
  2. Fujita, Masahisa & Thisse, Jacques-François, 1996. "Economics of Agglomeration," CEPR Discussion Papers 1344, C.E.P.R. Discussion Papers.
  3. Diego Puga, 1996. "Urbanisation Patterns: European vs Less Developed Countries," CEP Discussion Papers dp0305, Centre for Economic Performance, LSE.
  4. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
  5. 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.
  6. Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEPR Discussion Papers 1354, C.E.P.R. Discussion Papers.
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  8. Jean-Michel Grandmont, 2008. "Nonlinear Difference Equations, Bifurcations and Chaos: An Introduction," Working Papers 2008_23, Department of Economics, University of Venice "Ca' Foscari".
  9. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  10. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  11. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
  12. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
  13. Bentolila, Samuel & Jimeno, Juan Francisco, 1995. "Regional Unemployment Persistence (Spain, 1976-94)," CEPR Discussion Papers 1259, C.E.P.R. Discussion Papers.
  14. Ottaviano, Gianmarco Ireo Paolo & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  15. Diego Puga & Anthony J. Venables, 1995. "Preferential Trading Arrangements and Industrial Location," CEP Discussion Papers dp0267, Centre for Economic Performance, LSE.
  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. repec:fth:iniesr:430 is not listed on IDEAS
  18. Helpman, E., 1995. "The Size of Regions," Papers 14-95, Tel Aviv.
  19. Gordon H. Hanson, 1994. "Regional Adjustment to Trade Liberalization," NBER Working Papers 4713, National Bureau of Economic Research, Inc.
  20. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  21. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
  22. 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.
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