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Internal Geography, International Trade, and Regional Specialization

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  • A. Kerem Coşar
  • Pablo D. Fajgelbaum

Abstract

We introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The model features a dual-economy structure, in which locations near international gates specialize in export-oriented sectors while more distant locations do not trade with the rest of the world. The theory rationalizes patterns of specialization, employment, and relative incomes observed in developing countries that opened up to trade. We find regional specialization patterns consistent with the model in industry-level data from Chinese prefectures.

Suggested Citation

  • A. Kerem Coşar & Pablo D. Fajgelbaum, 2013. "Internal Geography, International Trade, and Regional Specialization," NBER Working Papers 19697, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19697
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    1. repec:eee:reecon:v:71:y:2017:i:4:p:740-758 is not listed on IDEAS
    2. Heid, Benedikt & Larch, Mario & Yotov, Yoto, 2017. "Estimating the Effects of Non-discriminatory Trade Policies within Structural Gravity Models," School of Economics Working Paper Series 2017-10, LeBow College of Business, Drexel University.
    3. repec:anr:reveco:v:9:y:2017:p:21-58 is not listed on IDEAS
    4. Coşar, A. Kerem & Demir, Banu, 2016. "Domestic road infrastructure and international trade: Evidence from Turkey," Journal of Development Economics, Elsevier, vol. 118(C), pages 232-244.
    5. Matsuyama, Kiminori, 2017. "Geographical Advantage: Home Market Effect in a Multi-Region World," CEPR Discussion Papers 12352, C.E.P.R. Discussion Papers.
    6. Pablo Fajgelbaum & Stephen J. Redding, 2014. "External Integration, Structural Transformation and Economic Development: Evidence from Argentina 1870-1914," NBER Working Papers 20217, National Bureau of Economic Research, Inc.
    7. Redding, Stephen J., 2016. "Goods trade, factor mobility and welfare," Journal of International Economics, Elsevier, vol. 101(C), pages 148-167.
    8. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, Elsevier.
    9. repec:eee:retrec:v:61:y:2017:i:c:p:2-14 is not listed on IDEAS
    10. Stephen J. Redding & Esteban Rossi-Hansberg, 2017. "Quantitative Spatial Economics," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 21-58, September.
    11. Eberhardt, Markus & Wang, Zheng & Yu, Zhihong, 2016. "From one to many central plans: Drug advertising inspections and intra-national protectionism in China," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 608-622.
    12. David Jinkins & Farid Farrokhi, 2017. "Wage inequality and the Location of Cities," 2017 Meeting Papers 924, Society for Economic Dynamics.
    13. Nuria Gallego & Carlos Llano, 2014. "The Border Effect and the Nonlinear Relationship between Trade and Distance," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1016-1048, November.
    14. Ferdinando Monte, 2014. "Local Transmission of Trade Shocks," Working Papers 2014-001, Human Capital and Economic Opportunity Working Group.
    15. Trevor Tombe & Jennifer Winter, "undated". "Fiscal Integration with Internal Trade: Quantifying the Effects of Equalizing Transfers," Working Papers 2013-28, Department of Economics, University of Calgary, revised 04 Feb 2017.
    16. Juan de Lucio & Raúl Mínguez & Asier Minondo & Francisco Requena, 2017. "The granular and fundamental components of export specialization," Working Papers 1704, Department of Applied Economics II, Universidad de Valencia.
    17. Treb Allen & Costas Arkolakis, 2014. "Trade and the Topography of the Spatial Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1085-1140.
    18. Carter, Colin A. & Ferguson, Shon, 2017. "Deregulation and Regional Specialization: Evidence from Canadian Agriculture," Working Paper Series 1185, Research Institute of Industrial Economics.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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