Intra-National Regional Heterogeneity in International Trade: Foreign Growth on Exports and Production of Domestic Regions

Kyoko Hirose () and Yushi Yoshida
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Kyoko Hirose: Faculty of Economics, Kyushu Sangyo University

No 54, Discussion Papers from Kyushu Sangyo University, Faculty of Economics

Abstract: International trade can induce changes in production structure across domestic regions as well as across industries. While the literature is well established on the latter issue, the former issue has been examined less. We present a two-country model with explicit incorporation of two regions in a home country and one region in a foreign country. Skilled workers, freely mobile across domestic regions, are required to set up a firm, and one region is located closer to a foreign country. Our theoretical model suggests that effects of foreign growth on production are asymmetric among regions while causing positive effects on the exports of all regions. We empirically test our theoretical hypothesis with production and export datasets of Japanese regions. Our empirical results provide strong evidence in support of a positive growth effect of a foreign market on regional exports and capture asymmetric effects of foreign growth on the production of domestic regions.

Keywords: Full information maximum likelihood; International trade; Regional exports; Regional heterogeneity; Regional production. (search for similar items in EconPapers)
JEL-codes: F12 F14 R12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-03
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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