The Rise and Fall of Regional Inequalities

Diego Puga

No 1575, CEPR Discussion Papers from Centre for Economic Policy Research

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 spread across regions to meet final consumer demand. As transport costs fall, increasing returns interacting with labour mobility and/or input-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 workers do not move across regions, further reductions in transport costs make firms increasingly sensitive to wage differentials, and may lead industry to spread out again.

Keywords: Agglomeration; Linkages; Migration; Regional Integration (search for similar items in EconPapers)
JEL-codes: F12 F15 R12 (search for similar items in EconPapers)
Date: 1997-02
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: The rise and fall of regional inequalities (1999)
Working Paper: The Rise and Fall of Regional Inequalities (1996)
Working Paper: The rise and fall of regional inequalities (1996)
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