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Trade infrastructure and firm location under Cournot competition

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  • Xi Yang
  • Nobuaki Hamaguchi

Abstract

In a two-country four-region setting, this paper analyzes the impact of trade infrastructure on firm locations when they interact weakly in Cournot competition, and capital is perfectly footloose. Trade infrastructure costs are additive in firm production and countries differ in their quality of domestic infrastructure. We show that there is a magnified impact of initial infrastructure difference on firm location choices whenever the market is more integrated internationally or within each country. Trade liberalization promotes regional dispersion in the country with better infrastructure. For the country with poor infrastructure, given the presence of a magnified infrastructure disadvantage, unilateral domestic market integration does not necessarily result in an inflow of firms. Copyright Springer-Verlag 2013

Suggested Citation

  • Xi Yang & Nobuaki Hamaguchi, 2013. "Trade infrastructure and firm location under Cournot competition," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 153-167, February.
    • Handle: RePEc:spr:anresc:v:50:y:2013:i:1:p:153-167
    DOI: 10.1007/s00168-011-0487-8
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    Keywords

    F12; R12;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • 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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