A Ricardian model of new trade and location theory

Luca Ricci

No 309, Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy"

Abstract: This paper provides a new model of firm's location choices. It integrates a Ricardian model of comparative advantage with the location effects deriving from trade costs, increasing returns to scale, product differentiation, and monopolistic competition. In a two-region, two-differentiated-good, one-factor framework, the regional degree of specialization depends positively on the extent of the comparative advantage in productivity and on the degree of returns to scale; it depends negatively on the magnitude of the trade costs. Hence, the model accommodates high levels of intra-industry trade among countries with similar level of development, as well as high levels of inter-industry trade among countries with different technologies.

Date: 1996
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Journal Article: A Ricardian Model of New Trade and Location Theory (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kondp2:309

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