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The core periphery model with asymmetric inter-regional and intra-regional trade costs

  • Vasco Leite

    ()

    (Faculdade de Economia, Universidade do Porto.)

  • Sofia B.S.D. Castro

    ()

    (CMUP and Faculdade de Economia, Universidade do Porto.)

  • João Correia-da-Silva

    ()

    (CEMPRE and Faculdade de Economia, Universidade do Porto.)

We generalize the model of Krugman (1991) to allow for asymmetric trade costs between regions and for (asymmetric) trade costs that are internal to the regions. We find that industrial activity, in a region, is enhanced by higher costs of importing and lower costs of exporting (more precisely, by a higher ratio between the two trade costs). This suggests that countries may impose tariffs on imported goods and seek to remove the import tariffs in other countries (unilateral protectionism) in order to foster industrial activity. Industrial activity is also promoted by lower domestic internal trade costs and higher foreign internal trade costs (more precisely, by a lower ratio between the two trade costs).

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File URL: http://www.fep.up.pt/investigacao/workingpapers/08.08.05_wp287.pdf
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Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 287.

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Length: 44 pages.
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:por:fepwps:287
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  1. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  2. OTTAVIANO, Gianmarco & TABUCHI , Takatoshi & THISSE, Jacques-François, . "Agglomeration and trade revisited," CORE Discussion Papers RP -1553, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Stephen Redding & Anthony J. Venables, 2001. "Economic Geography and International Inequality," CEP Discussion Papers dp0495, Centre for Economic Performance, LSE.
  4. Martin, Philippe & Rogers, Carol Ann, 1994. "Industrial Location and Public Infrastructure," CEPR Discussion Papers 909, C.E.P.R. Discussion Papers.
  5. Murata, Yasusada, 2002. "Rural-urban interdependence and industrialization," Journal of Development Economics, Elsevier, vol. 68(1), pages 1-34, June.
  6. Puga, Diego, 1997. "The Rise and Fall of Regional Inequalities," CEPR Discussion Papers 1575, C.E.P.R. Discussion Papers.
  7. Vasco Leite & Sofia B.S.D. Castro & João Correia-da-Silva, 2008. "The core periphery model with asymmetric inter-regional and intra-regional trade costs," FEP Working Papers 287, Universidade do Porto, Faculdade de Economia do Porto.
  8. Tomoya Mori & Alessandro Turrini, 2000. "Skills, Agglomeration and Segmentation," Development Working Papers 141, Centro Studi Luca d\'Agliano, University of Milano.
  9. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  10. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  11. Ottaviano, Gianmarco & Puga, Diego, 1997. "Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'," CEPR Discussion Papers 1699, C.E.P.R. Discussion Papers.
  12. BEHRENS, Kristian & GAIGNE, Carl & OTTAVIANO, Gianmarco I.P. & THISSE, Jacques-François, . "Countries, regions and trade: on the welfare impacts of economic integration," CORE Discussion Papers RP -1936, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 2003. "Agglomeration and economic geography," CORE Discussion Papers 2003016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Mossay, Pascal, 2006. "The core-periphery model: A note on the existence and uniqueness of short-run equilibrium," Journal of Urban Economics, Elsevier, vol. 59(3), pages 389-393, May.
  15. Fujita, Masahisa & Mori, Tomoya, 1996. "The role of ports in the making of major cities: Self-agglomeration and hub-effect," Journal of Development Economics, Elsevier, vol. 49(1), pages 93-120, April.
  16. Mori, Tomoya, 1997. "A Modeling of Megalopolis Formation: The Maturing of City Systems," Journal of Urban Economics, Elsevier, vol. 42(1), pages 133-157, July.
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