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Countries, regions and trade: On the welfare impacts of economic integration

Listed author(s):
  • Behrens, Kristian
  • Gaigne, Carl
  • Ottaviano, Gianmarco I.P.
  • Thisse, Jacques-Francois

We study the impact of falling international trade costs and falling national transport costs on the economic geography of countries involved in an integration process. Each country is formed by two regions between which labor is mobile, whereas there is no international mobility. Goods can be traded both nationally and internationally at positive, but different, costs. A decrease in trade costs and/or in transport costs has a direct impact on prices and wages, which allows us to account for the impact of changes in these parameters on the economic geography and welfare of each country. We show that, as trade barriers fall, the benefits of integration come after its costs. We also show that national transport policies are of the beggar-thy-neighbor type. On both counts, policy coordination is required in the process of economic integration.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 51 (2007)
Issue (Month): 5 (July)
Pages: 1277-1301

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Handle: RePEc:eee:eecrev:v:51:y:2007:i:5:p:1277-1301
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  3. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Boston College Working Papers in Economics 593, Boston College Department of Economics.
  4. Engel, C. & Rogers, J.H., 1995. "How Wide is the Border?," Papers 4-95-16, Pennsylvania State - Department of Economics.
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  7. Chang, Won & Winters, L. Alan, 1999. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," CEPR Discussion Papers 2179, C.E.P.R. Discussion Papers.
  8. Thierry Mayer & Keith Head, 2003. "The Empirics of Agglomeration and Trade," Working Papers 2003-15, CEPII research center.
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  10. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Agglomeration and trade revisited," CORE Discussion Papers 1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Charlot, Sylvie & Gaigné, Carl & Robert-Nicoud, Frédéric & Thisse, Jacques-François, 2004. "Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls," CEPR Discussion Papers 4715, C.E.P.R. Discussion Papers.
  12. Paluzie i Hernandez, Elisenda, 1999. "Trade policy and regional inequalities," ERSA conference papers ersa99pa231, European Regional Science Association.
  13. Behrens, Kristian & Gaigne, Carl & Ottaviano, Gianmarco I.P. & Thisse, Jacques-Francois, 2006. "How density economies in international transportation link the internal geography of trading partners," Journal of Urban Economics, Elsevier, vol. 60(2), pages 248-263, September.
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  16. Alberto F. Ades & Edward L. Glaeser, 1995. "Trade and Circuses: Explaining Urban Giants," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 195-227.
  17. PICARD, Pierre & ZENG, Dao-Zhi, 2003. "Agricultural sector and industrial agglomeration," CORE Discussion Papers 2003022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  18. Holger C. Wolf, 2000. "Intranational Home Bias In Trade," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 555-563, November.
  19. Keith Head & Thierry Mayer, 2000. "Non-Europe : The Magnitude and Causes of Market Fragmentation in the EU," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00267441, HAL.
  20. Winters, L. Alan & Chang, Won, 2000. "Regional integration and import prices: an empirical investigation," Journal of International Economics, Elsevier, vol. 51(2), pages 363-377, August.
  21. Monfort, Philippe & Nicolini, Rosella, 1998. "Regional Convergence and International Integration," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  22. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
  23. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
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