Trade, industrial location and environmental consciousness

Sotiris Karkalakos

No KERP 2007/15, Keele Economics Research Papers from Centre for Economic Research, Keele University

Abstract: It is shown in the context of a new economic geography that, when capital is heterogeneous (a degree of environmental sensitivity), then trade liberalization may lead to industrial agglomeration and inter-regional trade. Capital heterogeneity gives local monopsony power to firms but also introduces variations in the quality of the match. Matches occur, under environmental consciousness assumption, giving rise to an agglomeration force, which can offset the forces against, trade costs and the erosion of monopsony power. A robust agglomeration equilibrium is derived analytically and shows that pollution can provide a motive for trade by spatially concentrated industries with environmental sensitivities.

Keywords: Agglomeration; Pollution; Matching. (search for similar items in EconPapers)
JEL-codes: F10 Q20 R12 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2007-11
New Economics Papers: this item is included in nep-env, nep-geo and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:kee:kerpuk:2007/15

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