Search results for "Ulinateral trade"

Asymmetric trade and agglomeration

2003

We extend the quadratic utility approach by Ottaviano et al. [19] and byBehrens [1] to the range of intermediate values of transport costs in orderto investigate how asymmetric trade affects the regional distribution ofeconomic activities. Asymmetry in trade is an endogenous result of pricecompetition and transport costs: depending on both the spatial distribution offirms and the value of transport costs, only firms located in one of the tworegions can profitably access the foreign market, which gives rise to morecomplex patterns of trade. We show that the unilateral breaking of autarkygives rise to strong agglomeration forces which lead to the absorption of thesmaller regions’ industry. Fu…