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Internal Geography, International Trade, and Regional Specialization

  • A. Kerem Coşar
  • Pablo D. Fajgelbaum

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19697.

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Date of creation: Dec 2013
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Handle: RePEc:nbr:nberwo:19697
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  1. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
  2. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
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  10. Courant, Paul N & Deardorff, Alan V, 1992. "International Trade with Lumpy Countries," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 198-210, February.
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  13. Gao, Ting, 2004. "Regional industrial growth: evidence from Chinese industries," Regional Science and Urban Economics, Elsevier, vol. 34(1), pages 101-124, January.
  14. James E. Rauch, 1990. "Comparative Advantage, Geographic Advantage, and the Volume of Trade," NBER Working Papers 3512, National Bureau of Economic Research, Inc.
  15. Cullinane, Kevin & Wang, Teng-Fei, 2006. "Chapter 15 Port Governance in China," Research in Transportation Economics, Elsevier, vol. 17(1), pages 331-356, January.
  16. Holmes, Thomas J. & Stevens, John J., 2004. "Spatial distribution of economic activities in North America," 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 63, pages 2797-2843 Elsevier.
  17. Brian McCaig & Nina Pavcnik, 2014. "Export Markets and Labor Allocation in a Low-income Country," NBER Working Papers 20455, National Bureau of Economic Research, Inc.
  18. Kiminori Matsuyama, 1999. "Geography of the World Economy," Discussion Papers 1239, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  19. Starrett, David, 1978. "Market allocations of location choice in a model with free mobility," Journal of Economic Theory, Elsevier, vol. 17(1), pages 21-37, February.
  20. Hanson, Gordon H., 1996. "Economic integration, intraindustry trade, and frontier regions," European Economic Review, Elsevier, vol. 40(3-5), pages 941-949, April.
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