We find that there exists therefore a range of trade costs for which a self-selecting
equilibrium is possible and another smaller range for which is the only stable equilibrium.
One of the results of the model is the existence of a wage and productivity differential
between the core and peripheral regions. Recent empirical works have supported this
prediction using micro data.
The paper presented is highly stylised. In particular, the existence of congestion costs
in the core region as in Helpman (1995), or an imperfectly mobile labour force across regions
as modelled by Ludema and Wooton19 (1997), can prevent the model from having an
unrealistic catastrophic agglomeration at low transport costs (especially in the EU context). It
is not intention of this paper discount these factors. The aim is to emphasise that the
mechanisms highlighted in the paper may play an important role in the debate concerning the
adequacy of regional cohesion policies at both national and European levels.
19 They assume that workers have preferences for living in a particular location. The labour supply is not
perfectly elastic as assumed in our model but the labour supply schedule is upward-sloping. The authors obtain a
U-shaped relationship between manufacturing location and trade liberalization.
31
More intriguing information
1. Firm Creation, Firm Evolution and Clusters in Chile’s Dynamic Wine Sector: Evidence from the Colchagua and Casablanca Regions2. Strengthening civil society from the outside? Donor driven consultation and participation processes in Poverty Reduction Strategies (PRSP): the Bolivian case
3. The name is absent
4. Incorporating global skills within UK higher education of engineers
5. The name is absent
6. Competition In or For the Field: Which is Better
7. FISCAL CONSOLIDATION AND DECENTRALISATION: A TALE OF TWO TIERS
8. The name is absent
9. Barriers and Limitations in the Development of Industrial Innovation in the Region
10. Getting the practical teaching element right: A guide for literacy, numeracy and ESOL teacher educators