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Industrial structure, trade and regional economics : market segmentation

Author

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  • Vito Amendolagine
  • Gabriel Talmain

Abstract

TWe consider a general equilibrium model a la Bhaskar (Review of Economic Studies 2002): there are complementarities across sectors, each of which com- prise (many) heterogenous monopolistically competitive firms. Bhaskar's model is extended in two directions: production requires capital, and labour markets are segmented. Labour market segmentation models the difficulties of labour migrating across international barriers (in a trade context) or from a poor region to a richer one (in a regional context), whilst the assumption of a single cap- ital market means that capital flows freely between countries or regions. The model is solved analytically and a closed form solution is provided. Adding labour market segmentation to Bhaskar's two-tier industrial structure allows us to study, inter alia, the impact of competition regulations on wages and financial flows both in the regional and international context, and the output, welfare and financial implications of relaxing immigration laws. The analytical approach adopted allows us, not only to sign the effect of policies, but also to quantify their e¤ects. Introducing capital as a factor of production improves the realism of the model and refines its empirically testable implications.

Suggested Citation

  • Vito Amendolagine & Gabriel Talmain, 2010. "Industrial structure, trade and regional economics : market segmentation," Working Papers 2010_01, Business School - Economics, University of Glasgow.
  • Handle: RePEc:gla:glaewp:2010_01
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    Keywords

    market segmentation; monopolistic competition; industry competition; regional competition; capital flows;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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