Capital liberalization, industrial agglomeration and wage inequality
AbstractThis paper sets up a new economic geography model with diminishing marginal returns and examines the effect of capital liberalization on industrial agglomeration and wage inequality. The simulation results indicate that for the country with strict capital controls, capital liberalization can help reduce wage difference between countries in both nominal and real terms. It is also shown that when both comparative advantage and agglomeration are in effect, low trading costs does not necessarily cause the catastrophic agglomeration in the country with the larger market as most other NEG models predict.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 11355.
Date of creation: Dec 2007
Date of revision: May 2008
New Economic Geography; Capital Liberalization; Trade Costs;
Find related papers by JEL classification:
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-11 (All new papers)
- NEP-GEO-2008-11-11 (Economic Geography)
- NEP-URE-2008-11-11 (Urban & Real Estate Economics)
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