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The core periphery model with asymmetric inter-regional and intra-regional trade costs

  • Vasco Leite

    ()

  • Sofia Castro

    ()

  • João Correia-da-Silva

    ()

We generalize the model of Krugman (1991) to allow for asymmetric trade costs between regions and for (asymmetric) trade costs that are internal to the regions. We find that industrial activity, in a region, is enhanced by higher costs of importing and lower costs of exporting (more precisely, by a higher ratio between the two trade costs). This suggests that countries may impose tariffs on imported goods and seek to remove the import tariffs in other countries (unilateral protectionism) in order to foster industrial activity. Industrial activity is also promoted by lower domestic internal trade costs and higher foreign internal trade costs (more precisely, by a lower ratio between the two trade costs).

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File URL: http://hdl.handle.net/10.1007/s10258-009-0036-x
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Article provided by Springer in its journal Portuguese Economic Journal.

Volume (Year): 8 (2009)
Issue (Month): 1 (April)
Pages: 37-44

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Handle: RePEc:spr:portec:v:8:y:2009:i:1:p:37-44
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  1. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
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  12. Vasco Leite & Sofia B.S.D. Castro & João Correia-da-Silva, 2008. "The core periphery model with asymmetric inter-regional and intra-regional trade costs," FEP Working Papers 287, Universidade do Porto, Faculdade de Economia do Porto.
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