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Economic Integration and Welfare: Manufacturing vs. Agricultural Markets

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  • Hajime Takatsuka

    ()

  • Dao-Zhi Zeng

Abstract

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.

Suggested Citation

  • Hajime Takatsuka & Dao-Zhi Zeng, 2011. "Economic Integration and Welfare: Manufacturing vs. Agricultural Markets," ERSA conference papers ersa11p1720, European Regional Science Association.
  • Handle: RePEc:wiw:wiwrsa:ersa11p1720
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    References listed on IDEAS

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    1. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2003. "Plants and Productivity in International Trade," American Economic Review, American Economic Association, vol. 93(4), pages 1268-1290, September.
    2. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
    3. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    4. Head, Keith & Mayer, Thierry & Ries, John, 2002. "On the Pervasiveness of Home Market Effects," Economica, London School of Economics and Political Science, vol. 69(275), pages 371-390, August.
    5. 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.
    6. Crozet, Matthieu & Trionfetti, Federico, 2008. "Trade costs and the Home Market Effect," Journal of International Economics, Elsevier, vol. 76(2), pages 309-321, December.
    7. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    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. 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.
    10. 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.
    11. repec:hhs:iuiwop:430 is not listed on IDEAS
    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.
    13. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
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