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Countries, regions and trade: on the welfare impacts of economic integration

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Author Info

  • Kristian Behrens

    (CORE, Université Catholique de Louvain)

  • Carl Gaigne

    ()
    (Économie et Sociologie Rurales, INRA)

  • Gianmarco I.P. Ottaviano

    (Università di Bologna
    Fondazione Eni Enrico Mattei
    Centre for Economic Policy Resarch)

  • Jacques-François Thisse

    (CORE, Université Catholique de Louvain
    Paris School of Economics
    Centre for Economic Policy Research)

Abstract

We study the impact of falling international trade costs and falling national transport costs on the economic geography of countries involved in an integration process. Each country is formed by two regions between which labor is mobile, whereas there is no international mobility. Goods can be traded both nationally and internationally at positive, but different, costs. A decrease in trade costs and/or in transport costs has a direct impact on prices and wages in both countries. This allows us to account for the impact of changes in these parameters on the economic geography and welfare of each country. We show that, as trade barriers fall, the benefits of integration come after its costs. We also show that national transport policies are of the beggar-thy-neighbour type. On both counts, policy coordination is required in the process of economic integration.

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Bibliographic Info

Paper provided by Institut National de la Recherche Agronomique, France in its series Working Papers with number 10661.

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Length: 1277-1301
Date of creation: 2007
Date of revision:
Publication status: Published in European Economic Review
Handle: RePEc:inr:wpaper:10661

Note: CB 009613 JEL F12; F16; R12
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Postal: 4, Allée Adolphe Bobierre, CS 61103, 35011 Rennes Cedex
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Web page: http://www.international.inra.fr
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Related research

Keywords: AGGLOMERATION; ECONOMIC GEOGRAPHY; REGIONAL INTEGRATION; TRADE COST; TRANSPORT COST;

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References

References listed on IDEAS
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  1. Brulhart, Marius & Traeger, Rolf, 2005. "An account of geographic concentration patterns in Europe," Regional Science and Urban Economics, Elsevier, vol. 35(6), pages 597-624, November.
  2. Picard, Pierre M. & Zeng, Dao-Zhi, 2005. "Agricultural sector and industrial agglomeration," Journal of Development Economics, Elsevier, vol. 77(1), pages 75-106, June.
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  4. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
  5. CHARLOT, Sylvie & GAIGNÉ, Carl & ROBERT-NICOUD, Frédéric & THISSE, Jacques, 2003. "Agglomeration and welfare : the core-periphery model in the light of Bentham, Kaldor, and Rawls," CORE Discussion Papers 2003039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Haskel, Jonathan & Wolf, Holger, 2001. " The Law of One Price--A Case Study," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(4), pages 545-58, December.
  7. OTTAVIANO, Gianmarco & TABUCHI , Takatoshi & THISSE, Jacques-François, . "Agglomeration and trade revisited," CORE Discussion Papers RP -1553, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Keith Head & Thierry Mayer, 2004. "The Empirics of Agglomeration and Trade," Sciences Po publications info:hdl:2441/10191, Sciences Po.
  9. BEHRENS, Kristian & GAIGNE, Carl & OTTAVIANO, Gianmarco I.P. & THISSE, Jacques-François, . "How density economies in international transportation link the internal geography of trading partners," CORE Discussion Papers RP -1870, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Chang, Won & Winters, L. Alan, 1999. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," CEPR Discussion Papers 2179, C.E.P.R. Discussion Papers.
  11. Glaeser, E.L. & Ades, A.F., 1993. "Trade and Circuses: Explaining Urban Giants," Harvard Institute of Economic Research Working Papers 1646, Harvard - Institute of Economic Research.
  12. BEHRENS, Kristian & GAIGNE, Carl & OTTAVIANO, Gianmarco I.P. & THISSE, Jacques-François, . "Is remoteness a locational disadvantage?," CORE Discussion Papers RP -1905, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  18. repec:spo:wpecon:info:hdl:2441/10191 is not listed on IDEAS
  19. Spiros Bougheas & Panicos Demetriades & Edgar Morgenroth, 2003. "International aspects of public infrastructure investment," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 884-910, November.
  20. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
  21. Raul Livas Elizondo & Paul Krugman, 1992. "Trade Policy and the Third World Metropolis," NBER Working Papers 4238, National Bureau of Economic Research, Inc.
  22. Elisenda Paluzie Hernandez, 1999. "Trade policy and regional inequalities," Working Papers in Economics 48, Universitat de Barcelona. Espai de Recerca en Economia.
  23. Monfort, Philippe & Nicolini, Rosella, 1998. "Regional Convergence and International Integration," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  24. Pierre-Philippe Combes & Miren Lafourcade, 2005. "Transport costs: measures, determinants, and regional policy implications for France," Journal of Economic Geography, Oxford University Press, vol. 5(3), pages 319-349, June.
  25. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  26. Greenhut, Melvin L, 1981. "Spatial Pricing in the United States, West Germany and Japan," Economica, London School of Economics and Political Science, vol. 48(189), pages 79-86, February.
  27. Kristian Behrens & Carl Gaigné & Gianmarco I.P. Ottaviano & Jacques-François Thisse, 2006. "How density economies in international transportation link the internal geography of trading partners," Working Papers 9904, Institut National de la Recherche Agronomique, France.
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