Internal Geography, International Trade, and Regional Specialization

45 Pages Posted: 10 Dec 2013 Last revised: 28 Apr 2021

See all articles by Kerem Cosar

Kerem Cosar

Stockholm School of Economics - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); Bogazici University - Center for Economics and Econometrics

Pablo D. Fajgelbaum

University of California, Los Angeles (UCLA)

Date Written: December 2013

Abstract

We introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The model features a dual-economy structure, in which locations near international gates specialize in export-oriented sectors while more distant locations do not trade with the rest of the world. The theory rationalizes patterns of specialization, employment, and relative incomes observed in developing countries that opened up to trade. We find regional specialization patterns consistent with the model in industry-level data from Chinese prefectures.

Suggested Citation

Cosar, A. Kerem and Fajgelbaum, Pablo D., Internal Geography, International Trade, and Regional Specialization (December 2013). NBER Working Paper No. w19697, Available at SSRN: https://ssrn.com/abstract=2366011

A. Kerem Cosar (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Bogazici University - Center for Economics and Econometrics ( email )

Bogazici Universitesi
Bebek
Istanbul, 34342
Turkey

Pablo D. Fajgelbaum

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

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