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The rise and fall of regional inequalities

Puga, Diego (1996) The rise and fall of regional inequalities. CEPDP, 314. Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Identification Number: 314

Abstract

This paper analyses how the degree of regional integration affects regional differences in production structures and income levels. With high transport costs, industry is spead across regions to meet final consumer demad. As transport costs fall, increasing returns interacting with labour mobility and/or inout-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.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 1996 Diego Puga
Subjects: H Social Sciences > HF Commerce
JEL classification: F - International Economics > F1 - Trade > F15 - Economic Integration
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade
F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 12 Aug 2008 09:09
Last Modified: 01 Oct 2010 09:16
URI: http://eprints.lse.ac.uk/id/eprint/20643

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