The Effects of Globalization on Regional Inequality in a Model of Semi-endogenous Growth and Foot-loose Capital

Katsufumi Fukuda
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Katsufumi Fukuda: Graduate School of Social Science, Hiroshima University, Japan and Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan

No DP2013-25, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We show that manufacturing firms locate only in northern regions when transportation costs are not high, and in both northern and southern regions when transportation costs are high; we do so through the use of a semi-endogenous research and development growth model with international trade, footloose capital, and local knowledge spillover. Regional income inequality—defined as per-capita expenditure relative to price index—decreases in the latter case, because the northern share of expenditure does not change, on account of a constant and exogenous growth rate. The northern price index does not change, even as the southern price index decreases.

Keywords: Trade integration; Foot-loose capital; R&D growth; Scale effects; Regional inequality; local spillovers; Full agglomeration (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-08, Revised 2015-05
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