IDEAS home Printed from https://ideas.repec.org/p/cor/louvco/2004015.html
   My bibliography  Save this paper

Economic integration and agglomeration in a middle product economy

Author

Listed:
  • PENG, Shin-Kun
  • THISSE, Jacques-François
  • WANG, Ping

Abstract

The paper examines the interactions between economic integration and population agglomeration in a middle product economy displaying neoclassical growth. There are two vertically integrated economies. Each consists of a large number of final good competitive firms operating plants in both regions, and a large number of intermediate goods monopolistically competitive firms operating each in only one region. While immobile workers are employed with intermediate goods to produce the final good, mobile workers are used to design the line of differentiated intermediategood inputs. Capital is immobile, the final good is non-traded, whereas the intermediate goods are traded. We find that employment agglomeration and output growth need not be positively related. Furthermore, trade is not necessarily beneficial to regional growth, whereas trade between the two regions need not be associated with a widened skilled-unskilled wage gap.

Suggested Citation

  • PENG, Shin-Kun & THISSE, Jacques-François & WANG, Ping, 2004. "Economic integration and agglomeration in a middle product economy," CORE Discussion Papers 2004015, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2004015
    as

    Download full text from publisher

    File URL: https://uclouvain.be/en/research-institutes/immaq/core/dp-2004.html
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-329, June.
    2. Berliant, Marcus & Wang, Ping, 2003. "Dynamic Urban Models: Agglomeration and Growth," Working Papers 1167, California Institute of Technology, Division of the Humanities and Social Sciences.
    3. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "Economic Integration and Endogenous Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 531-555.
    4. Eric W. Bond & Kathleen Trask & Ping Wang, 2003. "Factor Accumulation and Trade: Dynamic Comparative Advantage with Endogenous Physical and Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1041-1060, August.
    5. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
    6. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    7. Xie, Danyang, 1998. "An Endogenous Growth Model with Expanding Ranges of Consumer Goods and Producer Durables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 439-460, May.
    8. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    9. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    10. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, March.
    11. Jaume Ventura, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 57-84.
    12. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    13. Nancy L. Stokey, 1991. "The Volume and Composition of Trade Between Rich and Poor Countries," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 63-80.
    14. Levy, Frank & Murnane, Richard J, 1992. "U.S. Earnings Levels and Earnings Inequality: A Review of Recent Trends and Proposed Explanations," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1333-1381, September.
    15. Baldwin, Richard E. & Martin, Philippe, 2004. "Agglomeration and regional growth," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 60, pages 2671-2711 Elsevier.
    16. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
    17. Magrini, Stefano, 2004. "Regional (di)convergence," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 62, pages 2741-2796 Elsevier.
    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. Sanyal, Kalyan K & Jones, Ronald W, 1982. "The Theory of Trade in Middle Products," American Economic Review, American Economic Association, vol. 72(1), pages 16-31, March.
    20. 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.
    21. Mills, Edwin S. & Nijkamp, Peter, 1987. "Advances in urban economics," Handbook of Regional and Urban Economics,in: E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 2, chapter 17, pages 703-714 Elsevier.
    22. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    23. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
    24. Venables, Anthony J., 1999. "Fragmentation and multinational production," European Economic Review, Elsevier, vol. 43(4-6), pages 935-945, April.
    25. Edward E. Leamer, 1992. "Wage Effects of A U.S. - Mexican Free Trade Agreement," NBER Working Papers 3991, National Bureau of Economic Research, Inc.
    26. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    27. Chen, Been-Lon & Shimomura, Koji, 1998. "Self-Fulfilling Expectations and Economic Growth: A Model of Technology Adoption and Industrialization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 151-170, February.
    28. Jones, Ronald W. & Peter Neary, J., 1984. "The positive theory of international trade," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 1, pages 1-62 Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. José Pedro Pontes, 2008. "Location of Upstream and Downstream Industries," Working Papers Department of Economics 2008/30, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    2. Yoshitsugu Kanemoto, 2012. "Cost-Benefit Analysis in Monopolistic Competition Models of Urban Agglomeration," GRIPS Discussion Papers 12-04, National Graduate Institute for Policy Studies.
    3. Chu, Angus C. & Peng, Shin-Kun, 2011. "International intellectual property rights: Effects on growth, welfare and income inequality," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 276-287, June.
    4. Juan M.C. Larrosa, 2012. "Strategic Equilibria In A Model Of Economic Growth With Input Interdependence," Bulletin of Economic Research, Wiley Blackwell, vol. 64(4), pages 537-548, October.
    5. Shin-Kun Peng & Raymond Riezman & Ping Wang, 2014. "Intermediate Goods Trade, Technology Choice and Productivity," IEAS Working Paper : academic research 14-A003, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    6. Berliant, Marcus & Wang, Ping, 2003. "Dynamic Urban Models: Agglomeration and Growth," Working Papers 1167, California Institute of Technology, Division of the Humanities and Social Sciences.
    7. Kristian Behrens & Frédéric Robert‐Nicoud, 2014. "Survival of the Fittest in Cities: Urbanisation and Inequality," Economic Journal, Royal Economic Society, vol. 124(581), pages 1371-1400, December.
    8. Kanemoto, Yoshitsugu, 2013. "Second-best cost–benefit analysis in monopolistic competition models of urban agglomeration," Journal of Urban Economics, Elsevier, vol. 76(C), pages 83-92.
    9. Fujishima, Shota, 2013. "Growth, agglomeration, and urban congestion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1168-1181.
    10. Wei-Bin Zhang, 2008. "Growth and residential distribution with economic structure and amenity: A synthesis of Solow-Uzawa's growth, Alonso's urban, and Muth's housing models," Papers in Regional Science, Wiley Blackwell, vol. 87(2), pages 277-303, June.
    11. Larrosa, Juan MC, 2007. "Optimal growth with intermediate goods interdependence: A difference game approach," MPRA Paper 4675, University Library of Munich, Germany.
    12. José Pedro Pontes, 2009. "Vertical Linkages and Multinational Plant Size," Working Papers Department of Economics 2009/30, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    13. Hsu, Wen-Tai & Wang, Ping, 2012. "Trade, firm selection, and industrial agglomeration," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 975-986.
    14. repec:spr:anresc:v:59:y:2017:i:2:d:10.1007_s00168-017-0840-7 is not listed on IDEAS
    15. Kanemoto, Yoshitsugu, 2013. "Evaluating benefits of transportation in models of new economic geography," Economics of Transportation, Elsevier, vol. 2(2), pages 53-62.

    More about this item

    Keywords

    economic integration; agglomeration; intermediate goods trade; growth;

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2004015. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS). General contact details of provider: http://edirc.repec.org/data/coreebe.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.