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Locational Disadvantage and Losses from Trade: Three Regions in Economic Geography

Author

Listed:
  • Takanori Ago

    (Takasaki City University of Economics)

  • Ikumo Isono

    (Graduate School of Economics, The University of Tokyo)

  • Takatoshi Tabuchi

    (Faculty of Economics, The University of Tokyo)

Abstract
We show that how spatial evolution is different between the two representative models of economic geography: Krugman (1991 JPE) and Ottaviano et al. (2002 IER). We analyze the impacts of falling transport costs on the spatial distribution of economic activities and welfare for three regions located on a line. In the former model, the central region always has locational advantage and manufacturing workers gain from trade. In the latter model, however, the opposite is true when markets are opened up to trade. This is because the price competition is so keen in the central region that manufacturing sector moves to the peripheral regions, which aggravates the social welfare. We then show that when goods are close substitutes and share of manufacturing is of an intermediate level, the manufacturing activities completely disappears from the central region leading to a full agglomeration in one peripheral region.

Suggested Citation

  • Takanori Ago & Ikumo Isono & Takatoshi Tabuchi, 2003. "Locational Disadvantage and Losses from Trade: Three Regions in Economic Geography," CIRJE F-Series CIRJE-F-224, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2003cf224
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2003/2003cf224.pdf
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    References listed on IDEAS

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    6. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
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    8. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Kristian Behrens, 2011. "International Integration And Regional Inequalities: How Important Is National Infrastructure?," Manchester School, University of Manchester, vol. 79(5), pages 952-971, September.
    2. Behrens, Kristian, 2005. "How endogenous asymmetries in interregional market access trigger regional divergence," Regional Science and Urban Economics, Elsevier, vol. 35(5), pages 471-492, September.
    3. Takanori Ago & Ikumo Isono & Takatoshi Tabuchi, 2006. "Locational disadvantage of the hub," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 40(4), pages 819-848, December.
    4. P. Commendatore & I. Kubin & I. Sushko, 2021. "Obtaining a hub position: A New Economic Geography analysis of industry location and trade network structures," Metroeconomica, Wiley Blackwell, vol. 72(1), pages 148-172, February.
    5. Souleymane COULIBALY, 2006. "Persistent Uneven Spread of Economic Activities within Developing RIAs," Cahiers de Recherches Economiques du Département d'économie 06.01, Université de Lausanne, Faculté des HEC, Département d’économie.

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