Industrial structure, trade and regional economics: market segmentation

Vito Amendolagine and Gabriel Talmain ()

Working Papers from Business School - Economics, University of Glasgow

Abstract: TWe consider a general equilibrium model a la Bhaskar (Review of Economic Studies 2002): there are complementarities across sectors, each of which com- prise (many) heterogenous monopolistically competitive firms. Bhaskar's model is extended in two directions: production requires capital, and labour markets are segmented. Labour market segmentation models the difficulties of labour migrating across international barriers (in a trade context) or from a poor region to a richer one (in a regional context), whilst the assumption of a single cap- ital market means that capital flows freely between countries or regions. The model is solved analytically and a closed form solution is provided. Adding labour market segmentation to Bhaskar's two-tier industrial structure allows us to study, inter alia, the impact of competition regulations on wages and financial flows both in the regional and international context, and the output, welfare and financial implications of relaxing immigration laws. The analytical approach adopted allows us, not only to sign the effect of policies, but also to quantify their e¤ects. Introducing capital as a factor of production improves the realism of the model and refines its empirically testable implications.

Keywords: market segmentation; monopolistic competition; industry competition; regional competition; capital flows (search for similar items in EconPapers)
JEL-codes: F16 F22 L11 R13 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-geo, nep-ind and nep-int
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Working Paper: Industrial Structure, Trade and Regional Economics: Market Segmentation (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2010_01

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