Footloose capital, market access, and the geography of regional state aid
AbstractThe global welfare implications of home market effects in trade models with imperfect competition are little understood. This paper proposes a simple model in which such implications can be easily analyzed. It shows an overall tendency of imperfectly competitive sectors to inefficiently cluster in locations that offer market access advantages. The more so the stronger the market power of firms as well as the intensity of increasing returns to scale and the lower the trade costs. As such features are likely to differ widely across sectors, those results provide theoretical ground to the promotion of regional policies that are also sectorspecific and not only region-specific as currently in the EU. --
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Bibliographic InfoPaper provided by Hamburg Institute of International Economics (HWWA) in its series HWWA Discussion Papers with number 132.
Date of creation: 2001
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Web page: http://www.econstor.eu/handle/10419/20
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economic integration; specialization; home market effect; regional disparities; regional policy;
Other versions of this item:
- Gianmarco I.P. Ottaviano, 2001. "Footloose Capital, Market Access, and the Geography of Regional State Aid," Development Working Papers 155, Centro Studi Luca d\'Agliano, University of Milano.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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