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Regional Integration and Industrial Location in a Landlocked Spatial Economy

  • Hemanta Shrestha

    (AT&T)

  • Dennis Heffley

    (University of Connecticut)

Regional integration proposals often require agreements between countries that differ in geographic size, resource endowments, transportation assets, technologies, and product quality. In this asymmetric setting, questions arise about the potential for mutual gains and the distribution of benefits among industries and workers in each country. This paper examines how regional integration between a small landlocked country and a large neighboring country--with a unique port facility that both nations must use to export goods--affects the wage and location decisions of firms, the allocation of labor, the welfare of each country's workers and firms, and aggregate measures of economic welfare in each country and the region. A simulated spatial labor market model is used to explore the economic effects of various stages of regional integration. Beginning with autarky as a benchmark case, we consider two forms of regional integration: partial mobility (mobile labor with geographically restricted firms); and full mobility (mobile labor and firms) with convergence of production technologies and product quality.

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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2003-07.

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Length: 44 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:uct:uconnp:2003-07
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Web page: http://www.econ.uconn.edu/

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  1. Puga, Diego & Venables, Anthony J, 1995. "Preferential Trading Arrangements and Industrial Location," CEPR Discussion Papers 1309, C.E.P.R. Discussion Papers.
  2. Benson, Bruce L. & Hartigan, James C., 1983. "Tariffs which lower price in the restricting country : An analysis of spatial markets," Journal of International Economics, Elsevier, vol. 15(1-2), pages 117-133, August.
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  7. Krugman, Paul R, 1993. "On the Relationship between Trade Theory and Location Theory," Review of International Economics, Wiley Blackwell, vol. 1(2), pages 110-22, June.
  8. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644 Elsevier.
  9. Gronberg, Timothy J & Meyer, Jack, 1982. "Spatial Pricing, Spatial Rents, and Spatial Welfare," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 633-44, November.
  10. Ben-David, Dan, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 653-79, August.
  11. Puga, Diego, 1997. "The Rise and Fall of Regional Inequalities," CEPR Discussion Papers 1575, C.E.P.R. Discussion Papers.
  12. Simon P. Anderson & Andre De Palma & Gap-Seon Hong, 1992. "Firm Mobility and Location Equilibrium," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 76-88, February.
  13. P Krugman & Anthony J. Venables, 1993. "Intergration," CEP Discussion Papers dp0172, Centre for Economic Performance, LSE.
  14. Anderson, Simon P & Neven, Damien J, 1991. "Cournot Competition Yields Spatial Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 793-808, November.
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