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Structural Change and Regional Convergence: The Case of Declining Transport Costs

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Regional income inequality within countries is an important contributor to global inequality. I investigate its relationship to economic growth using the US experience since 1880. I modify a multi-sector general equilibrium growth model and highlight two important forces: (1) structural change, which disproportionately benefit poor agricultural regions; and (2) transport cost reductions, which shrinks regional price and wage differences. Structural change contributes to Southern growth but is offset in the Midwest by transport cost reductions. The Midwest case is of greater relevance for developing countries with high transport costs, and suggests growth may not significantly reduce global income inequality.

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  • Trevor Tombe, 2012. "Structural Change and Regional Convergence: The Case of Declining Transport Costs," Working Papers tt0061, Wilfrid Laurier University, Department of Economics, revised 2012.
    • Handle: RePEc:wlu:wpaper:tt0061
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    Keywords

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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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