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Trade, industrial location and environmental consciousness

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  • Sotiris Karkalakos

    ()
    (Economics, Keele University)

Abstract

It is shown in the context of a new economic geography that, when capital is heterogeneous (a degree of environmental sensitivity), then trade liberalization may lead to industrial agglomeration and inter-regional trade. Capital heterogeneity gives local monopsony power to firms but also introduces variations in the quality of the match. Matches occur, under environmental consciousness assumption, giving rise to an agglomeration force, which can offset the forces against, trade costs and the erosion of monopsony power. A robust agglomeration equilibrium is derived analytically and shows that pollution can provide a motive for trade by spatially concentrated industries with environmental sensitivities.

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Bibliographic Info

Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2007/15.

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Length: 19 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:kee:kerpuk:2007/15

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Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
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Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm

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Keywords: Agglomeration; Pollution; Matching.;

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