Working Paper: CEPR ID: DP1267
Authors: Uwe Walz
Abstract: This paper presents a dynamic, two-region general equilibrium model in which inter-regional production and trade patterns are endogenously determined. Localized growth stems from geographical concentration of an industrial sector exhibiting permanent productivity increases. Geographical concentration is due to the interaction of the size of local markets and local competition in the differentiated input industry. Regional factor endowment with an immobile factor is decisive for long-run specialization, trade and growth patterns between regions if large endowment differences prevail. With equally-sized regions, multiple equilibria exist. Furthermore, the paper finds that integration might lead to increasing regional concentration of production and growth.
Keywords: Regional Growth; Economic Geography; Factor Mobility
JEL Codes: O18; R11; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| geographical concentration of an industrial sector (R32) | localized growth (R30) |
| local market sizes and competition (L11) | localized growth (R30) |
| large endowment differences among regions (I24) | multiple equilibria (D50) |
| multiple equilibria (D50) | long-term specialization and growth patterns (D25) |
| integration policies (F55) | regional disparities in production and growth rates (R11) |
| policies aimed at reducing transport costs (R48) | regional disparities in production and growth rates (R11) |
| infant-region policy (J13) | gradual integration of less developed regions (F15) |