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Asymmetric trade and agglomeration

Listed author(s):
  • BEHRENS, Kristian

    ()

    (LATEC - CNRS UMR 5118 - MSH - Université de Bourgogne)

We extend the quadratic utility approach by Ottaviano et al. [19] and by Behrens [1] to the range of intermediate values of transport costs in or- der to investigate how asymmetric trade affects the regional distribution of economic activities. Asymmetry in trade is an endogenous result of price competition and transport costs: depending on both the spatial distribution of firms and the value of transport costs, only firms located in one of the two regions can profitably access the foreign market, which gives rise to more complex patterns of trade. We show that the unilateral breaking of autarky gives rise to strong agglomeration forces which lead to the absorption of the smaller regions' industry. Further, the number of equilibria increases once the structure of trade is endogenously accounted for. / Nous étendons le modèle quadratique de Ottaviano et al. [19] et Behrens [1] aux valeurs intermédiaires de coûts de transport afin d'examiner la manière dont le commerce asymétrique affecte la répartition régionale de l'activité économique. L'asymétrie dans le commerce est un résultat endogène de la compétition en prix et de l'existence de coûts de transport. Suivant la répartition spatiale des firmes et les valeurs des coûts de transport, seules les firmes installées dans l'une des deux régions peuvent accéder aux marchés extérieurs, ce qui résulte en des structures d'échanges plus complexes. Nous montrons que l'abandon unilatéral de l'autarcie donne naissance à de fortes forces d'agglomération, lesquelles mènent à l'absorption de l'industrie de la petite région. De plus, le nombre d'équilibres augmente dès que la structure des échanges devient endogène.

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Paper provided by LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne in its series LEG - Document de travail - Economie with number 2003-10.

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Length: 53 pages
Date of creation: Apr 2003
Handle: RePEc:lat:legeco:2003-10
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  1. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
  2. Tomoya Mori & Koji Nishikimi & Tony E. Smith, 2002. "Some Empirical Regularities of Spatial Economies: A Relationship between Industrial Location and City Size," KIER Working Papers 551, Kyoto University, Institute of Economic Research.
  3. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
  4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
  5. Konishi, Hideo, 2000. "Formation of Hub Cities: Transportation Cost Advantage and Population Agglomeration," Journal of Urban Economics, Elsevier, vol. 48(1), pages 1-28, July.
  6. Ginsburgh, Victor & Papageorgiou, Yorgo & Thisse, Jacques-Francois, 1985. "On existence and stability of spatial equilibria and steady-states," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 149-158, June.
  7. Ottaviano, Gianmarco & Thisse, Jacques-Francois, 2004. "Agglomeration and economic geography," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 58, pages 2563-2608 Elsevier.
  8. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(2), pages 284-314, June.
  9. Winters, L. Alan & Chang, Won, 2000. "Regional integration and import prices: an empirical investigation," Journal of International Economics, Elsevier, vol. 51(2), pages 363-377, August.
  10. Mori, Tomoya & Nishikimi, Koji, 2002. "Economies of transport density and industrial agglomeration," Regional Science and Urban Economics, Elsevier, vol. 32(2), pages 167-200, March.
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