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Economic Integration and Welfare: Manufacturing vs. Agricultural Markets

  • Hajime Takatsuka

    ()

  • Dao-Zhi Zeng

In the literature of new trade theory, most papers study the industrial location by imposing the assumption of free transportation in the agricultural sector. This paper explicitly incorporates arbitrary transport costs in both the manufacturing and the agricultural sectors into the Helpman-Krugman-Davis model of two countries and one production factor. The following results are obtained. First, we find a necessary and sufficient condition for the home market effect (HME) to be observed. Secondly, we find that integrating manufacturing markets has contrastive impacts on two countries to integrating agricultural markets. Our results are suggestive for the understanding of various international trade agreements.

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File URL: http://www-sre.wu.ac.at/ersa/ersaconfs/ersa11/e110830aFinal01720.pdf
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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa11p1720.

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Date of creation: Sep 2011
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Handle: RePEc:wiw:wiwrsa:ersa11p1720
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  1. Matthieu Crozet & Federico Trionfetti, 2007. "Trade Costs and the Home Market Effect," Working Papers 2007-05, CEPII research center.
  2. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2009. "Trade, wages and productivity," LSE Research Online Documents on Economics 28609, London School of Economics and Political Science, LSE Library.
    • Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2014. "Trade, Wages, And Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1305-1348, November.
  3. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Agglomeration and trade revisited," CORE Discussion Papers 1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Head, Keith & Mayer, Thierry & Ries, John, 2002. "On the Pervasiveness of Home Market Effects," CEPR Discussion Papers 3454, C.E.P.R. Discussion Papers.
  5. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  6. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers 530, Society for Economic Dynamics.
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  8. Michel Beine & Serge Coulombe, 2007. "Economic integration and the diversification of regional exports: evidence from the Canadian--U.S. Free Trade Agreement," Journal of Economic Geography, Oxford University Press, vol. 7(1), pages 93-111, January.
  9. Dao-Zhi Zeng & Toru Kikuchi, 2009. "Home Market Effect And Trade Costs," The Japanese Economic Review, Japanese Economic Association, vol. 60(2), pages 253-270.
  10. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
  11. Krugman, Paul R & Venables, Anthony J, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 857-80, November.
  12. Richard E. Baldwin & Frederic Robert-Nicoud, 2000. "Free trade agreements without delocation," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 766-786, August.
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