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On the Development Strategy of Countries of Intermediate size - An Analysis of Heterogenous Fims in a Multiregion Framework

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Author Info

  • Forslid, Rikard

    ()
    (Dept. of Economics, Stockholm University)

  • Okubo, Toshihiro

    ()
    (Kobe University)

Abstract

This paper compares two policies: trade cost reduction and firm relocation cost reduction using a three-country version of a heterogeneous-firms economic geography model, where the three countries have different market (population) size. We show how the effects of the two policies differ, in particular, for the country of intermediate size. Unless the intermediate country is very small, it will gain industry when relocation costs are reduced, but lose industry when trade costs are reduced. The smallest country loses industry in both cases, but only experiences lower welfare in the case of lower relocation costs. Thus, the ranking of the policies from the point of view of the two small and intermediate countries tends to be the opposite.

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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2010:28.

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Length: 26 pages
Date of creation: 20 Dec 2010
Date of revision:
Handle: RePEc:hhs:sunrpe:2010_0028

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
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Web page: http://www.ne.su.se/
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Keywords: Agglomeration; firm heterogeneity; multi-country model; trade liberalisation; relocation costs;

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References

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Citations

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Cited by:
  1. Richard Baldwin & Toshihiro Okubo, 2012. "International Trade, Offshoring and Heterogeneous Firms," Keio/Kyoto Joint Global COE Discussion Paper Series 2012-014, Keio/Kyoto Joint Global COE Program.
  2. Forslid, Rikard & Okubo, Toshihiro, 2011. "On the development strategy of countries of intermediate size - An analysis of heterogenous firms in a multiregion framework," CEPR Discussion Papers 8178, C.E.P.R. Discussion Papers.
  3. Biing-Shiunn Yang & Chao-Cheng Mai, 2013. "The impact of uncertain environmental regulatory policy on optimal plant location and anti-pollution technology selection," The Annals of Regional Science, Springer, vol. 50(3), pages 753-769, June.

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