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Trade integration and regional disparity in a model of scale-invariant growth

  • Minniti, Antonio
  • Parello, Carmelo Pierpaolo

This paper explores the relation between trade integration, economic growth and regional inequality in a two-region model of endogenous industry location and scale-invariant growth. We depart from recent contributions of New Economic Geography in that our model does not exhibit the "strong" scale effect in R&D which is inconsistent with time-series evidence from advanced OECD economies. In contrast with previous research, we find that, when R&D spillovers are localized, trade integration affects economic growth only in the short-run; the sign of this (temporary) effect depends on whether intertemporal knowledge spillovers in R&D are positive or negative. We show that this result has important implications for the relation between trade integration and regional income disparity.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 41 (2011)
Issue (Month): 1 (January)
Pages: 20-31

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Handle: RePEc:eee:regeco:v:41:y:2011:i:1:p:20-31
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