Regional Implications of Financial Market Development: Industry Location and Income Inequality

Maximilian von Ehrlich

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft - CRED

Abstract: We develop a heterogeneous-firms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating financial frictions reduces the incentive of high-skilled workers to migrate to one region such that an unequal distribution of industrial activity becomes less likely. Hence, financial market development has opposite regional implications as trade liberalization. While the former leads to more dispersion of economic activity across space, the latter tends to drive clustering. This has immediate implications for income inequality both between regions and skill groups. According to our model, financial development reduces inequality in both dimensions.

Date: 2013-10
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.vwiit.ch/cred/CREDResearchPaper01.pdf (application/pdf)

Related works:
Journal Article: Regional implications of financial market development: Industry location and income inequality (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rdv:wpaper:credresearchpaper01

Access Statistics for this paper

More papers in Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft - CRED Contact information at EDIRC.
Bibliographic data for series maintained by Franz Koelliker ().