The Rise and Fall of Regional Inequalities
London School of Economics CEP Disc. Paper 314
43 Pages Posted: 2 May 1997
Date Written: March 1997
Abstract
This paper analyzes how the degree of regional integration affects regional differences in production structures and income levels. With high transport costs, industry is spread across regions to meet final consumer demand. As transport costs fall, increasing returns interacting with labor mobility and/or input-output linkages between firms create a tendency for the agglomeration of increasing returns activities. When workers migrate towards locations with more firms and higher real wages, this intensifies agglomeration. When, instead, workers do not move across regions, further reductions in transport costs make firms increasingly sensitive to wage differentials, leading industry to spread out again.
JEL Classification: F12, F15, R12
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Intra-National Versus International Trade: How Stubborn are Nations in Global Integration?
-
Rich Trades, Scarce Capabilities: Industrial Development Revisited
By John Sutton
-
Agglomeration and Economic Development: Import Substitution vs. Trade Liberalization
By Diego Puga and Anthony J. Venables
-
Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly
By Roberto Cellini and Guido Candela
-
By Patricio Aroca, William F. Maloney, ...
-
Deficits, Growth, and the Current Slowdown: What Role for Fiscal Policy?