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Geographical advantage: Home market effect in a multi-region world

Kiminori Matsuyama ()

Research in Economics, 2017, vol. 71, issue 4, 740-758

Abstract: I propose a theoretical framework for studying the effects of geographical factors on the distribution of industries across many regions. The geographical feature of each region is summarized by a proximity matrix, whose elements measure the closeness between every pair of regions and depend on the parameters representing the transport and other costs of using a variety of trade routes. A change in these costs of trade affects the distribution of industries by amplifying the geographical advantages and disadvantages of regions. Through a series of examples, I demonstrate how this framework can be used not only to examine the effects of an improvement in transport infrastructure, but also to address some problems from economic history, regional economic integration, and the north-south division, and discuss some geopolitical issues.

Keywords: Monopolistic competition; A multi-region model of costly trade indifferentiated goods; Home market effect; Regional economic integration; Uneven development; Convergence versus divergence; Geographical advantages and disadvantages; Proximity matrix; Trade routes (search for similar items in EconPapers)
JEL-codes: F12 F15 O11 R12 (search for similar items in EconPapers)
Date: 2017
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