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On the development strategy of countries of intermediate size -An analysis of heterogenous firms in a multiregion framework

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Author Info

  • Rikard Forslid

    (Stockholm University (Sweden) and CEPR (UK))

  • Toshihiro Okubo

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

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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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2010-36.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2010-36.

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Length: 27 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:kob:dpaper:dp2010-36

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References

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  1. Okubo, Toshihiro & Picard, Pierre M. & Thisse, Jacques-François, 2010. "The spatial selection of heterogeneous firms," Journal of International Economics, Elsevier, vol. 82(2), pages 230-237, November.
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  6. Rikard Forslid & Toshihiro Okubo, 2010. "On the development strategy of countries of intermediate size -An analysis of heterogenous firms in a multiregion framework," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2010-36, Research Institute for Economics & Business Administration, Kobe University.
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Citations

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Cited by:
  1. Richard E. Baldwin & Toshihiro Okubo, 2014. "International Trade, Offshoring and Heterogeneous Firms," Review of International Economics, Wiley Blackwell, vol. 22(1), pages 59-72, 02.
  2. Rikard Forslid & Toshihiro Okubo, 2011. "On the development strategy of countries of intermediate size - An analysis of heterogeneous firms in a multi-region framework," Keio/Kyoto Joint Global COE Discussion Paper Series, Keio/Kyoto Joint Global COE Program 2011-029, Keio/Kyoto Joint Global COE Program.
  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, Springer, vol. 50(3), pages 753-769, June.

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