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Asymmetric trade and agglomeration

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  • BEHRENS, Kristian

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

Abstract

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.

Suggested Citation

  • BEHRENS, Kristian, 2003. "Asymmetric trade and agglomeration," LEG - Document de travail - Economie 2003-10, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.
  • Handle: RePEc:lat:legeco:2003-10
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    References listed on IDEAS

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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.
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    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.
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    Cited by:

    1. Kristian Behrens, 2003. "International trade and internal geography revisited," Working Papers hal-01526511, HAL.

    More about this item

    Keywords

    unilateral trade; asymetry; agglomération; geography;

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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