The core periphery model with asymmetric inter-regional and intra-regional trade costs
We generalize the model of Krugman (J Polit Econ 99(3):483–499, 1991) to allow for asymmetric trade costs between regions and for (asymmetric) trade costs that are internal to the regions. We find that industrial activity, in a region, is enhanced by higher costs of importing and lower costs of exporting (more precisely, by a higher ratio between the two trade costs). This suggests that countries may impose tariffs on imported goods and seek to remove the import tariffs in other countries (unilateral protectionism) in order to foster industrial activity. Industrial activity is also promoted by lower domestic internal trade costs and higher foreign internal trade costs (more precisely, by a lower ratio between the two trade costs).
KeywordsNew Economic Geography Core-periphery Trade costs
JEL ClassificationsF12 F15 F21 R12 R13
We thank Diego Puga, José María Chamorro Rivas, and participants at the II Economic Theory Workshop in Vigo and the 2nd Meeting of the Portuguese Economic Journal. Vasco Leite (firstname.lastname@example.org) thanks Fundação para a Ciência e Tecnologia (FCT) for financial support (Ph.D. scholarship). Sofia B.S.D. Castro (email@example.com) acknowledges support from Centro de Matemática da Universidade do Porto, financed by FCT through the programmes POCTI and POSI. João Correia-da-Silva (firstname.lastname@example.org) acknowledges support from CEMPRE and research grant PTDC/ECO/66186/2006 from FCT and FEDER.
- Baldwin R, Forslid R, Martin P, Ottaviano GIP, Robert-Nicoud F (2003) Economic geography and public policy. Princeton University Press, PrincetonGoogle Scholar
- Fujita M, Krugman P, Venables AJ (2001) The spatial economy. MIT, LondonGoogle Scholar
- Leite V, Castro SBSD, Correia-da-Silva J (2008) The core-periphery model with asymmetric inter-regional and intra-regional trade costs. FEP Working Papers, 287, August 2008Google Scholar
- Ottaviano GIP, Thisse J-F (2004) Agglomeration and economic geography. In: Henderson JV, Thisse J-F (eds) Handbook of regional and urban economics. Elsevier, AmsterdamGoogle Scholar