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The Impact of Exogenous Asymmetry on Trade and Agglomeration in Core-Periphery Model

  • Sidorov Aleksandr

    ()

The project studies the Krugman's CP model in the weakly explored case of asymmetric regions in two settings: international trade and agglomeration processes. First setting implies that the industrial labor is immobile, while second one consider mobile industrial labor and long-run equilibria. Analytical study of both settings requires application of advanced mathematical analysis, e.g. implicit function theory. For international trade we find how equilibrium prices, production, consumption, wages and welfare for all population groups respond to shifts in all exogenous parameters: characteristics of utility function, transportation costs and degree of asymmetry in initial labor endowment. As for agglomeration process, it was found that the asymmetry in the population distribution simplifies pattern of agglomeration, making the direction of migration more definite, so the well-known ambiguity of final destination may disappear under sufficiently large extent of asymmetry. From political point of view, it means that under some conditions, openness of international trade may be harmful to immobile population of the smaller country.

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Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 11/05e.

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Date of creation: 06 Nov 2011
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Handle: RePEc:eer:wpalle:11/05e
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  1. Robert-Nicoud, Frédéric, 2004. "The Structure of Simple 'New Economic Geography' Models," CEPR Discussion Papers 4326, C.E.P.R. Discussion Papers.
  2. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February.
  3. GINSBURGH, Victor & PAPAGEORGIOU, Yorgo & THISSE, Jacques-François, . "On existence and stability of spatial equilibria and steady-states," CORE Discussion Papers RP 651, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. 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.
  5. Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
  6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  7. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert Nicoud, 2003. "Economic Geography and Public Policy," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00179815, HAL.
  8. Berliant, Marcus & Kung, Fan-chin, 2009. "Bifurcations in Regional Migration Dynamics," MPRA Paper 13053, University Library of Munich, Germany.
  9. Baldwin, Richard E & Forslid, Rikard, 2000. "The Core-Periphery Model and Endogenous Growth: Stabilizing and Destabilizing Integration," Economica, London School of Economics and Political Science, vol. 67(267), pages 307-24, August.
  10. Mossay, Pascal, 2006. "The core-periphery model: A note on the existence and uniqueness of short-run equilibrium," Journal of Urban Economics, Elsevier, vol. 59(3), pages 389-393, May.
  11. Klaesson, Johan & Larsson, Hanna, 2009. "Wages, Productivity and Industry Composition – agglomeration economies in Swedish regions," Working Paper Series in Economics and Institutions of Innovation 203, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  12. Michael Roos, 2006. "Regional price levels in Germany," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1553-1566.
  13. Pierre-Philippe Combes & Thierry Mayer & Jacques-François Thisse, 2008. "Economic Geography: The Integration of Regions and Nations," Post-Print halshs-00754863, HAL.
  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. Michael Beenstock & Daniel Felsenstein, 2008. "Regional Heterogeneity, Conditional Convergence and Regional Inequality," Regional Studies, Taylor & Francis Journals, vol. 42(4), pages 475-488.
  16. Starrett, David, 1978. "Market allocations of location choice in a model with free mobility," Journal of Economic Theory, Elsevier, vol. 17(1), pages 21-37, February.
  17. Richard E. Baldwin & Rikard Forslid, 1999. "The Core-Periphery Model and Endogenous Growth: Stabilising and De-Stabilising Integration," NBER Working Papers 6899, National Bureau of Economic Research, Inc.
  18. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
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