Trade Liberalization and the Spatial Distribution of Economic Activity within a Country
U of Nottingham Research Paper No. 2007/23
25 Pages Posted: 25 Jun 2007
Date Written: June 2007
The effects of the liberalization of international trade are analyzed in a New Economic Geography model of a country with an asymmetric distribution of housing between regions. Labour is mobile between regions but not between countries. Trade liberalization tends to reduce inequalities in the distribution of population between the two regions, although population is always more unequally distributed than housing. Results are similar when there is a bias in preferences towards home-produced varieties of manufactures. If consumers care relatively little about housing and transport costs are high enough, an agglomerated equilibrium becomes stable.
Keywords: International trade, agglomeration, economic geography, housing costs
JEL Classification: F12, R12
Suggested Citation: Suggested Citation