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Structural Change and Regional Convergence: The Case of Declining Transport Costs

Trevor Tombe ()

Working Papers from Wilfrid Laurier University, Department of Economics

Abstract: Regional income inequality within countries is an important contributor to global inequality. I investigate its relationship to economic growth using the US experience since 1880. I modify a multi-sector general equilibrium growth model and highlight two important forces: (1) structural change, which disproportionately benefit poor agricultural regions; and (2) transport cost reductions, which shrinks regional price and wage differences. Structural change contributes to Southern growth but is offset in the Midwest by transport cost reductions. The Midwest case is of greater relevance for developing countries with high transport costs, and suggests growth may not significantly reduce global income inequality.

Keywords: Regional Convergence; Dual-Economy Models; Transportation Costs (search for similar items in EconPapers)
JEL-codes: O11 R11 (search for similar items in EconPapers)
Pages: 28
Date: 2012, Revised 2012
New Economics Papers: this item is included in nep-geo, nep-tre and nep-ure
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Working Paper: Structural change and regional convergence: the case of declining transport costs (2011) Downloads
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