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Why capital does not migrate to the south: a new economic geography perspective

Thia, Jang Ping (2008) Why capital does not migrate to the south: a new economic geography perspective. CEP Discussion Paper, No. 895. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 9780853283287

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Abstract

This paper explains why capital does not flow from the North to the South - the Lucas Paradox - with a New Economic Geography model that incorporates mobile capital, immobile labour, and productively heterogeneous firms. In contrast to neoclassical theories, the results show that even a small difference in the ex-ante productivity distribution between North and South can a have significant impact on the location of firms. Despite differences in aggregate capital to labour ratios, wage and rental rates continue to be the same in both locations. The paper also analyses the effects of risk on industrial locations, and shows why ‘low-tech’ industries tend to migrate to the South, while ‘high-tech’ industries continue to locate in the North.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2008 The author
Library of Congress subject classification: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: F - International Economics > F1 - Trade > F15 - Economic Integration
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)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: No. 895
Date Deposited: 06 Jul 2010 15:22
URL: http://eprints.lse.ac.uk/28508/

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