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The core periphery model with asymmetric inter-regional and intra-regional trade costs

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  • Vasco Leite

    ()
    (Faculdade de Economia, Universidade do Porto.)

  • Sofia B.S.D. Castro

    ()
    (CMUP and Faculdade de Economia, Universidade do Porto.)

  • João Correia-da-Silva

    ()
    (CEMPRE and Faculdade de Economia, Universidade do Porto.)

Abstract

We generalize the model of Krugman (1991) to allow for asymmetric trade costs between regions and for (asymmetric) trade costs that are internal to the regions. We find that industrial activity, in a region, is enhanced by higher costs of importing and lower costs of exporting (more precisely, by a higher ratio between the two trade costs). This suggests that countries may impose tariffs on imported goods and seek to remove the import tariffs in other countries (unilateral protectionism) in order to foster industrial activity. Industrial activity is also promoted by lower domestic internal trade costs and higher foreign internal trade costs (more precisely, by a lower ratio between the two trade costs).

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 287.

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Length: 44 pages.
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:por:fepwps:287

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Keywords: New Economic Geography; Core-Periphery; Trade costs; Unilateral protectionism.;

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References

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  1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  2. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers.
  3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  4. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  5. Ottaviano, Gianmarco Ireo Paolo & Thisse, Jacques-François, 1998. "Agglomeration and Trade Revisited," CEPR Discussion Papers 1903, C.E.P.R. Discussion Papers.
  6. Mori, Tomoya, 1997. "A Modeling of Megalopolis Formation: The Maturing of City Systems," Journal of Urban Economics, Elsevier, vol. 42(1), pages 133-157, July.
  7. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 2003. "Agglomeration and economic geography," CORE Discussion Papers 2003016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  9. repec:fth:iniesr:430 is not listed on IDEAS
  10. Vasco Leite & Sofia B.S.D. Castro & João Correia-da-Silva, 2008. "The core periphery model with asymmetric inter-regional and intra-regional trade costs," FEP Working Papers 287, Universidade do Porto, Faculdade de Economia do Porto.
  11. BEHRENS, Kristian & GAIGNE, Carl & OTTAVIANO, Gianmarco I.P. & THISSE, Jacques-François, . "Countries, regions and trade: on the welfare impacts of economic integration," CORE Discussion Papers RP -1936, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Diego Puga, 1996. "The Rise and Fall of Regional Inequalities," CEP Discussion Papers dp0314, Centre for Economic Performance, LSE.
  13. Murata, Yasusada, 2002. "Rural-urban interdependence and industrialization," Journal of Development Economics, Elsevier, vol. 68(1), pages 1-34, June.
  14. Mori Mori, Tomoya & Turrini, Alessandro Antonio, 2000. "Skills, Agglomeration and Segmentation," CEPR Discussion Papers 2645, C.E.P.R. Discussion Papers.
  15. Mossay, Pascal, 2006. "The core-periphery model: A note on the existence and uniqueness of short-run equilibrium," Journal of Urban Economics, Elsevier, vol. 59(3), pages 389-393, May.
  16. Gianmarco I. P. Ottaviano & Diego Puga, 1998. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," The World Economy, Wiley Blackwell, vol. 21(6), pages 707-731, 08.
  17. Fujita, Masahisa & Mori, Tomoya, 1996. "The role of ports in the making of major cities: Self-agglomeration and hub-effect," Journal of Development Economics, Elsevier, vol. 49(1), pages 93-120, April.
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Cited by:
  1. Vasco Leite & Sofia Castro & João Correia-da-Silva, 2009. "The core periphery model with asymmetric inter-regional and intra-regional trade costs," Portuguese Economic Journal, Springer, vol. 8(1), pages 37-44, April.
  2. Wataru Johdo, 2013. "Asymmetric inter-regional transportation costs, industrial location and growth," Economics Bulletin, AccessEcon, vol. 33(2), pages 1082-1090.

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