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| Author: | Krugman, P. Venables, A. J. |
| Title: | Integration, specialization, and adjustment |
| Journal: | European Economic Review
1996 : APR, VOL. 40:3-5, p. 959-967 |
| Index terms: | LOCATION OF INDUSTRY EUROPE USA TRADE BARRIERS IMPERFECT COMPETITION |
| Language: | eng |
| Abstract: | The location of two industries in two countries are considered in the paper. Both of the industries are imperfectly competitive, producing goods for final consumption and use as intermediates. Intermediate usage creates demand and cost linkages btw. firms, encouraging industrial agglomeration. With high trade barriers, each industry operates in both locations to supply final consumers. At lower trade barriers agglomeration forces dominate and each industry concentrates in a single location. Economic integration therefore induces agglomeration. There are long run gains from integration, but during the adjustment process some of the labour force may suffer lower real wages as relocation of industry occurs. |
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