Spatial inequality, globalization, and footloose capital

Toshiaki Takahashi (), Hajime Takatsuka () and Dao-Zhi Zeng ()

Economic Theory, 2013, vol. 53, issue 1, 213-238

Abstract: This paper shows the equivalence of spatial inequalities in industrial location and in income by revisiting the home market effect (HME) without any homogeneous good based on a reconstructed footloose capital model. In this simple framework, spatial inequalities in industrial location and in income are the HMEs in terms of firm share and wage, respectively. We show that the larger country has a more-than-proportionate share of firms and a higher wage. Furthermore, both the wage differential and the industrial location in the larger country evolve in an inverted U-pattern when transport costs decline. Finally, we analytically examine the effects of trade liberalization on the welfare and show that both countries may gain from globalization. Copyright Springer-Verlag 2013

Keywords: Spatial inequality; Globalization; Home market effect; Footloose capital; F12; R12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:53:y:2013:i:1:p:213-238

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DOI: 10.1007/s00199-011-0686-7

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