Regional Convergence and International Integration
In this paper, we analyse the geographic concentration of economic activities within the framework of a two countries and four regions model. Trade both between regions and countries entails transport costs which are differentiated according to the interregional or international nature of the flows. Allowing for regional migration of the population, the model configures the equilibra of this systems as key parameters change. The results obtained suggest that both types of transaction costs affect the incentive for firms to cluster geographically. Consequently, processes of integration between nations such as the one taking place through the constitution of the European Union is identified as a factor possibly favoring the emergence of regional economic agglomeration.
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