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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. 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.
  2. Tomoya Mori & Alessandro Turrini, 2000. "Skills, Agglomeration and Segmentation," Development Working Papers 141, Centro Studi Luca d\'Agliano, University of Milano.
  3. Redding, Stephen J. & Venables, Anthony J, 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers.
  4. Vasco Leite & Sofia Castro & João Correia-da-Silva, 2009. "The core periphery model with asymmetric inter-regional and intra-regional trade costs," Portuguese Economic Journal, Springer, vol. 8(1), pages 37-44, April.
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  12. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  13. Behrens, Kristian & Gaigne, Carl & Ottaviano, Gianmarco I.P. & Thisse, Jacques-Francois, 2007. "Countries, regions and trade: On the welfare impacts of economic integration," European Economic Review, Elsevier, vol. 51(5), pages 1277-1301, July.
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  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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