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Trade integration and regional disparity in a model of scale-invariant growth

Antonio Minniti () and Carmelo Parello ()

Regional Science and Urban Economics, 2011, vol. 41, issue 1, 20-31

Abstract: This paper explores the relation between trade integration, economic growth and regional inequality in a two-region model of endogenous industry location and scale-invariant growth. We depart from recent contributions of New Economic Geography in that our model does not exhibit the "strong" scale effect in R&D which is inconsistent with time-series evidence from advanced OECD economies. In contrast with previous research, we find that, when R&D spillovers are localized, trade integration affects economic growth only in the short-run; the sign of this (temporary) effect depends on whether intertemporal knowledge spillovers in R&D are positive or negative. We show that this result has important implications for the relation between trade integration and regional income disparity.

Keywords: Regions; Trade; integration; Regional; disparity; Growth; Scale; effects (search for similar items in EconPapers)
Date: 2011
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