Ricardian Comparative Advantage and Geographical Concentration

Research output: Contribution to journalArticlepeer-review

Abstract

This paper analyses geographical concentration using the continuum-of-goods trade model in the presence of labor migration, Ricardian comparative advantage and Marshallian-type external increasing returns to scale. The findings show that higher transportation costs lead to concentration in one region, and lower transportation costs lead to diversification between the regions. For intermediate transportation costs, asymmetric diversification becomes a stable equilibrium in which the smaller population region has higher wage rates and a smaller externality, and vice versa. However, because the asymmetric equilibrium is an inefficient outcome, it leaves room for government intervention.

Original languageEnglish
Pages (from-to)620-637
Number of pages18
JournalReview of Development Economics
Volume15
Issue number4
DOIs
Publication statusPublished - 2011 Nov 1

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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