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Geographical Concentration, Comparative Advantage, and Public Policy

  • Toshihiro Okubo

    ()

    (IUHEI)

This paper analyzes the geographical concentration and diversification of industries in the Continuum-of-Goods Trade Model in the presence of labor migration, comparative advantage, and external increasing returns to scale. In the model, higher transportation costs lead to concentration in one region, and lower transportation costs lead to diversification between the regions. For intermediate transportation costs, asymmetric diversification becomes a stable equilibrium through a reduction in the range of nontraded goods due to external increasing returns to scale and transportation costs. However, asymmetric equilibrium is an inefficient outcome: Pareto dominated by the other equilibria. To prevent this inefficient equilibrium, subsidies may be useful to sustain symmetric diversification.

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File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIWP14-2004.pdf
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Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 14-2004.

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Length: 28
Date of creation: Jul 2004
Date of revision:
Handle: RePEc:gii:giihei:heiwp14-2004
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  1. 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.
  2. Glenn Ellison & Edward L. Glaeser, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," Harvard Institute of Economic Research Working Papers 1862, Harvard - Institute of Economic Research.
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  6. Diego Puga, 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEP Discussion Papers dp0279, Centre for Economic Performance, LSE.
  7. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  8. K.H. Midelfart & H.G. Overman & S.J. Redding & A.J. Venables, 2000. "The location of European industry," European Economy - Economic Papers 142, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  9. Forslid, Rikard & Wooton, Ian, 1999. "Comparative Advantage and the Location of Production," CEPR Discussion Papers 2118, C.E.P.R. Discussion Papers.
  10. Marvin Goodfriend & John McDermott, 1994. "Early development," Working Paper 94-02, Federal Reserve Bank of Richmond.
  11. Midelfart-Knarvik, K.H. & Overman, H.G. & Venables, A.J., 2000. "Comparative Advantage and Economic Geography: Estimating the Location of Production in the EU," Papers 18/00, Norwegian School of Economics and Business Administration-.
  12. Itoh, Motoshige & Kiyono, Kazuharu, 1987. "Welfare-Enhancing Export Subsidies," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 115-37, February.
  13. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  14. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
  15. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February.
  16. Vernon Henderson, 1999. "Marshall's Economies," NBER Working Papers 7358, National Bureau of Economic Research, Inc.
  17. Davis, Donald R. & Weinstein, David E., 2003. "Market access, economic geography and comparative advantage: an empirical test," Journal of International Economics, Elsevier, vol. 59(1), pages 1-23, January.
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