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Journal of EconomicTheory
ISSN : 0022-0531

Economic integration and agglomeration in a middle product economy


Shin-Kun Peng | Academia Sinica and National Taiwan University
Jacques-Francois Thisse | CORE, Universite Catholique de Louvain and CEPR
Ping Wang | Washington University

Vol.131 No.1 , pp.1 ~ 25


We examine the interactions between economic integration and employment agglomeration in a neoclassical-growth, middle-product economy. There are two vertically integrated economies, with competitive final good firms operating plants in both regions and monopolistically-competitive intermediate good firms operating each in only one region. Immobile workers are employed with traded middle products to produce the nontraded final good; mobile workers are used with immobile capital to design and produce differentiated intermediate good inputs. While agglomeration and growth need not be positively related, trade need not enhance regional growth nor widen the skilled?unskilled wage gap.


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