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Geographical advantage: Home market effect in a multi-region world

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  • Matsuyama, Kiminori

Abstract

I propose a theoretical framework for studying the effects of geographical factors on the distribution of industries across many regions. The geographical feature of each region is summarized by a proximity matrix, whose elements measure the closeness between every pair of regions and depend on the parameters representing the transport and other costs of using a variety of trade routes. A change in these costs of trade affects the distribution of industries by amplifying the geographical advantages and disadvantages of regions. Through a series of examples, I demonstrate how this framework can be used not only to examine the effects of an improvement in transport infrastructure, but also to address some problems from economic history, regional economic integration, and the north-south division, and discuss some geopolitical issues.

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  • Matsuyama, Kiminori, 2017. "Geographical advantage: Home market effect in a multi-region world," Research in Economics, Elsevier, vol. 71(4), pages 740-758.
    • Handle: RePEc:eee:reecon:v:71:y:2017:i:4:p:740-758
    DOI: 10.1016/j.rie.2017.10.002
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    More about this item

    Keywords

    Monopolistic competition; A multi-region model of costly trade indifferentiated goods; Home market effect; Regional economic integration; Uneven development; Convergence versus divergence; Geographical advantages and disadvantages; Proximity matrix; Trade routes;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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