Integration, Specialization and Adjustment
The paper considers the equilibrium location of two industries in two countries. Both industries are imperfectly competitive and produce goods which are used in final consumption and as intermediates by firms in the same industry. Intermediate usage creates cost and demand linkages between firms and a tendency for agglomeration of each industry. When trade barriers are high the equilibrium involves division of both industries between both locations in order to meet the final demands of consumers. At lower trade barriers agglomeration forces dominate and the equilibrium involves specialization, with each industry concentrated in a single location. Economic integration may induce specialization. The paper studies the simple dynamics of the model and demonstrates that during the adjustment process a sizeable proportion of the labour force may suffer lower real wages as relocation of industry occurs, although there are long-run gains from integration.
|Date of creation:||Dec 1993|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Krugman & Anthony J. Venables, 1995.
"Globalization and the Inequality of Nations,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 110(4), pages 857-880.
- Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
- Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
- Krugman, Paul & Venables, Anthony J, 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
- Anthony J. Venables, 1993.
"Equilibrium Locations of Vertically Linked Industries,"
CEP Discussion Papers
dp0137, Centre for Economic Performance, LSE.
- 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.
- Venables, Anthony J, 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
- repec:hhs:iuiwop:430 is not listed on IDEAS
- Paul Krugman, 1990.
"Increasing Returns and Economic Geography,"
NBER Working Papers
3275, National Bureau of Economic Research, Inc.
- Dixit, Avinash K & Stiglitz, Joseph E, 1975.
"Monopolistic Competition and Optimum Product Diversity,"
The Warwick Economics Research Paper Series (TWERPS)
64, University of Warwick, Department of Economics.
- 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.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:886. 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: ()
If references are entirely missing, you can add them using this form.