Research Papers in Economics, Department of Economics, Stockholm University
On the Development Strategy of Countries of Intermediate size - An Analysis of Heterogenous Fims in a Multiregion Framework
() and Toshihiro Okubo
Abstract: This paper compares two policies: trade cost reduction and
firm relocation cost reduction using a three-country version of a
heterogeneous-firms economic geography model, where the three countries
have different market (population) size. We show how the effects of the two
policies differ, in particular, for the country of intermediate size.
Unless the intermediate country is very small, it will gain industry when
relocation costs are reduced, but lose industry when trade costs are
reduced. The smallest country loses industry in both cases, but only
experiences lower welfare in the case of lower relocation costs. Thus, the
ranking of the policies from the point of view of the two small and
intermediate countries tends to be the opposite.
Keywords: Agglomeration; firm heterogeneity; multi-country model; trade liberalisation; relocation costs; (follow links to similar papers)
JEL-Codes: F12; F15; F21; R12; (follow links to similar papers)
26 pages, December 20, 2010
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Sten Nyberg ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom