 Trade Policy and Mega-Cities in LDCs: A General Equilibrium Model with Numerical SimulationsMPRA Paper from University Library of Munich, Germany Abstract: This paper follows the new economic geography approach to model the relationships between trade policy and spatial agglomeration of production in the context of a small open developing economy. We construct a general equilibrium model with interactions between centripetal forces and centrifugal forces that determine linkages between urban and rural regions. Centripetal forces such as labor migration, increasing returns, and transport costs tend to concentrate economic activities and population in the urban region. This causes the inequality between urban and rural areas to increase. On the other hand, centrifugal forces such as congestion and urban land rents favor dispersion of firms and workers. This favors a balanced urban system that is conducive for rural development. We concentrate on explaining how trade policy affects the interactions between these forces by implementing the theoretical model through numerical simulations. The results suggest that trade liberalization can improve urban-rural inequalities as long as the country that implements trade policy reform does not face any trade restrictions in the external market. Keywords: agglomeration; urban-rural inequalities; trade policy; trade costs (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:1902 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.