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The Rise and Fall of Regional Inequalities

  • Diego Puga

This paper analyses how the degree of regional integration affects regional differences in production structures and income levels. With high transport costs, industry is spead across regions to meet final consumer demad. As transport costs fall, increasing returns interacting with labour mobility and/or inout-output linkages between firms create a tendency for the agglomeration of increasing returns activities. When workers migrate towards locations with more firms and higher real wages, this intensifies agglomeration. When instead workers do not move across regions, further reductions in transport costs make firms increasingly sensitive to wage differentials, leading industry to spread out again.

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File URL: http://cep.lse.ac.uk/pubs/download/DP0314.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0314.

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Date of creation: Nov 1996
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Handle: RePEc:cep:cepdps:dp0314
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
  2. Puga, Diego & Venables, Anthony J., 1997. "Preferential trading arrangements and industrial location," Journal of International Economics, Elsevier, vol. 43(3-4), pages 347-368, November.
  3. Decressin, Jörg & Fatás, Antonio, 1994. "Regional Labour Market Dynamics in Europe," CEPR Discussion Papers 1085, C.E.P.R. Discussion Papers.
  4. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  5. Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
  6. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP 1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Diego Puga & Anthony J. Venables, 1996. "The spread of industry: spatial agglomeration in economic development," LSE Research Online Documents on Economics 20683, London School of Economics and Political Science, LSE Library.
  8. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
  9. Diego Puga, 1996. "Urbanisation patterns: European vs less developed countries," LSE Research Online Documents on Economics 20656, London School of Economics and Political Science, LSE Library.
  10. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  11. Ottaviano, Gianmarco & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  12. Helpman, E., 1995. "The Size of Regions," Papers 14-95, Tel Aviv.
  13. Costas Megir & Danny Quah, 1996. "Regional Convergence Clusters Across Europe," CEP Discussion Papers dp0274, Centre for Economic Performance, LSE.
  14. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
  15. Hanson, Gordon H., 1998. "Regional adjustment to trade liberalization," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 419-444, July.
  16. Bentolila, Samuel & Jimeno, Juan F, 1995. "Regional Unemployment Persistence (Spain, 1976-94)," CEPR Discussion Papers 1259, C.E.P.R. Discussion Papers.
  17. Brülhart, Marius, 1996. "Regional Integration, Scale Economies and Industry Location in the European Union," CEPR Discussion Papers 1435, C.E.P.R. Discussion Papers.
  18. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  19. Jean-Michel Grandmont, 2008. "Nonlinear Difference Equations, Bifurcations and Chaos: An Introduction," Working Papers 2008_23, Department of Economics, University of Venice "Ca' Foscari".
  20. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  21. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
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