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Spatial inequality, globalization, and footloose capital

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  • Toshiaki Takahashi

    ()

  • Hajime Takatsuka

    ()

  • Dao-Zhi Zeng

    ()

Abstract

This paper shows the equivalence of spatial inequalities in industrial location and in income by revisiting the home market effect (HME) without any homogeneous good based on a reconstructed footloose capital model. In this simple framework, spatial inequalities in industrial location and in income are the HMEs in terms of firm share and wage, respectively. We show that the larger country has a more-than-proportionate share of firms and a higher wage. Furthermore, both the wage differential and the industrial location in the larger country evolve in an inverted U-pattern when transport costs decline. Finally, we analytically examine the effects of trade liberalization on the welfare and show that both countries may gain from globalization. Copyright Springer-Verlag 2013

Suggested Citation

  • Toshiaki Takahashi & Hajime Takatsuka & Dao-Zhi Zeng, 2013. "Spatial inequality, globalization, and footloose capital," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 53(1), pages 213-238, May.
  • Handle: RePEc:spr:joecth:v:53:y:2013:i:1:p:213-238
    DOI: 10.1007/s00199-011-0686-7
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Zeng, Dao-Zhi & Uchikawa, Tomohiro, 2014. "Ubiquitous inequality: The home market effect in a multicountry space," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 225-233.
    2. Tadashi Morita & Hajime Takatsuka & Kazuhiro Yamamoto, 2015. "Does Globalization Foster Economic Growth?," The Japanese Economic Review, Japanese Economic Association, vol. 66(4), pages 492-519, December.
    3. repec:spr:anresc:v:59:y:2017:i:2:d:10.1007_s00168-017-0840-7 is not listed on IDEAS
    4. Takatsuka, Hajime & Zeng, Dao-Zhi, 2016. "Nontariff protection without an outside good," International Review of Economics & Finance, Elsevier, vol. 41(C), pages 65-78.
    5. Anping Chen & Peter Nijkamp & Takatoshi Tabuchi & Jouke Dijk, 2014. "Regional science research in China: Spatial dynamics, disparities and regional productivity," Papers in Regional Science, Wiley Blackwell, vol. 93(2), pages 223-227, June.
    6. Xi Yang, 2014. "Special Issue: Issues in Asia. Guest Editor: Laixun Zhao," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 313-325, May.
    7. Zhou, Yiming & Zeng, Dao-Zhi, 2015. "Offshoring, globalization, and welfare," The North American Journal of Economics and Finance, Elsevier, vol. 31(C), pages 75-93.
    8. Hayato Kato & Toshihiro Okubo, 2017. "Market Size in Globalization," Keio-IES Discussion Paper Series 2017-001, Institute for Economics Studies, Keio University.
    9. Jian Wang & Junqian Xu, 2015. "Home market effect, spatial wages disparity: an empirical reinvestigation of China," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 313-333, December.

    More about this item

    Keywords

    Spatial inequality; Globalization; Home market effect; Footloose capital; 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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