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The Effects of Globalization on Regional Inequality in a Model of Semi-endogenous Growth and Foot-loose Capital

  • Katsufumi Fukuda

    (Graduate School of Social Science, Hiroshima University, Japan and Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

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    We show that manufacturing firms locate only in northern regions when transportation costs are not high, and in both northern and southern regions when transportation costs are high; we do so through the use of a semi-endogenous research and development growth model with international trade, footloose capital, and local knowledge spillover. Regional income inequality—defined as per-capita expenditure relative to price index—decreases in the latter case, because the northern share of expenditure does not change, on account of a constant and exogenous growth rate. The northern price index does not change, even as the southern price index decreases.

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    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2013-25.pdf
    File Function: First version, 2013
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    Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2013-25.

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    Length: 26 pages
    Date of creation: Aug 2013
    Date of revision: May 2015
    Handle: RePEc:kob:dpaper:dp2013-25
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    1. Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers.
    2. Segerstrom, Paul S, 1998. "Endogenous Growth without Scale Effects," American Economic Review, American Economic Association, vol. 88(5), pages 1290-1310, December.
    3. Guanghua Wan & Ming Lu & Zhao Chen, 2007. "Globalization And Regional Income Inequality: Empirical Evidence From Within China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(1), pages 35-59, 03.
    4. Jian, T & Sachs, J-D & Warner, A-M, 1995. "Trends in Regional Inequality in China," Papers 518, Harvard - Institute for International Development.
    5. Elias Dinopoulos & Peter Thompson, 1999. "Scale effects in Schumpeterian models of economic growth," Journal of Evolutionary Economics, Springer, vol. 9(2), pages 157-185.
    6. Dinopoulos, Elias & Thompson, Peter, 1998. " Schumpeterian Growth without Scale Effects," Journal of Economic Growth, Springer, vol. 3(4), pages 313-35, December.
    7. Minniti, Antonio & Parello, Carmelo Pierpaolo, 2011. "Trade integration and regional disparity in a model of scale-invariant growth," Regional Science and Urban Economics, Elsevier, vol. 41(1), pages 20-31, January.
    8. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
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