Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics


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This, in turn, induces more workers to migrate to the city. Likewise, suppose that a large variety of intermediate goods is available in a city. The forward linkage implies knowledge spillover, mainly through face-to-face communications of tacit knowledge. Although we have considered the three types of agglomeration forces separately, they actually work together as the driving power for the growth of cities. Firms may also be attracted to a local market which has far less intense competition than the core market. From the complicated balance of agglomeration and dispersion forces, a variety of agglomeration patterns emerges.

Obviously, this tug-of-war can be analyzed only within a general equilibrium framework where both forces are simultaneously determined. This has 18 Basic viewpoints on East Asian economic integration resulted in at least two new phenomena in the pattern of the international location of industries. One is fragmentation.

As will be pointed out in Section 2. Another issue of interest is the formation of industrial agglomeration, although the relationship between economic integration and agglomeration is not necessarily obvious. As noted in Section 2. The creation of the EU was an early manifestation of this phenomenon. In North America, the NAFTA came into being in ; and in East Asia, although there is no region-wide free trade agreement, de facto regional integration has been progressing.

Since inter-regional trade is essentially impossible, the potential market of each region is exactly the same as its own population size, leading to the dispersion of economic activities by the same proportion. Now suppose that trade costs decrease gradually and inter-regional trade starts growing. A region exhibits high market potential if it is endowed with its own large population or because of its advantageous geographic position which endows it with good accessibility to a large number of consumers in other regions, or both.

This, in turn, tends to boost real income because more goods are now available within the same region, relieving consumers of transport costs. This Regional integration in East Asia 19 positive feedback mechanism leads to the self-organization of an agglomeration from any dispersed spatial structure. A question naturally arises as to what may happen if, in the most extreme case, trade costs become close to zero.

Hence there is no need to maintain an agglomeration. In this pattern, Japan has played the role of core economy. The international division of labor has developed as Japan has become increasingly specialized in technologically advanced industries while successively shedding industries in which it no longer holds a comparative advantage; these industries, in turn, moved to nearby less developed countries the Asian NIEs — newly industrializing economies.

According to Fujita , in Japan accounted for 72 percent of the total GDP in East Asia, while within Japan, economic core regions represented 40 percent of the national total. It is reasonable to assume that the three kinds of agglomeration forces noted in Section 2. Some factors changed in the s. First, the Asian NIEs caught up with Japan in certain technological areas, such as semiconductors and information and telecommunication equipment i.

Second, China emerged not only as a location for cheap labor but also as a huge consumer market. Let us examine some characteristics of economic relationships in East Asia. Table 2. D and East Asian countries in terms of GDP and world trade shares, to This implies that although Japan remains in the dominant position, China has been catching up very rapidly over the last two decades. As shown in Table 2. Its composition also changed over the same period.

As a consequence, they have accounted for an even greater share of world trade than Japan. This means that East Asia as a whole has built up an export platform that ships to the rest of the world. It can be seen from Figure 2. This is not surprising, since many juxtaposed rich countries with small land areas have been cooperating in 22 Basic viewpoints on East Asian economic integration unison over the past half-century, making regional integration considerably deeper and wider. In East Asia and North America intra-regional trade has shown steady growth over the past couple of decades. It should be noted that this growth of intra-regional trade in East Asia has not been driven by any region-wide free trade agreement as in the case of the EU and subsequently NAFTA.

Figure 2. The growth in the share of intra-regional trade for the whole of East Asia has been accompanied by a gradual increase in trade within each sub-region. In fact, trade among the countries of Northeast Asia has been growing more rapidly recently. The trade pattern in East Asia is characterized by an intra-regional division of labor. We can see from Figure 2. On the other hand, Japan is the major supplier of capital goods and parts in a complementary relationship with China. South Korea and Taiwan have characteristics similar to Japan, although they are still net exporters of consumer goods.

Singapore is specialized in capital goods related to information technology and processed materials derived from petrochemicals. Other ASEAN countries are net exporters of consumer goods, while also showing a comparative advantage in capital goods the Philippines and Malaysia in computers, Thailand in automobiles , and in processed and unprocessed primary commodities Indonesia. These observations imply that local capital investment in the Chinese economy, involving the emergence of a large variety of local intermediate-goods suppliers, is very vigorous, which implies a mutual stimulation between foreign and domestic investment, leading to agglomeration.

On the other hand, ASEAN remains dependent on foreign capital, and its local capital is not playing the leading role in capital accumulation. To summarize, the growth of intra-regional trade in East Asia has developed in the triangular trade pattern depicted in Figure 2. This process can be interpreted as the rise of market potential catalyzed by FDI followed by domestic investment that further increased market potential.

Middle-income Southeast Asian economies are concerned about the mobility of capital, which is tending to concentrate in China. As Figure 2.

Within East Asia, the Japanese automobile industry held a dominant share in because of agglomeration economies based on input linkage. It then dispersed mainly due to increased local production in North America and East Asia. The dispersion to other parts of East Asia was also due to the lower labor costs in those parts. In the meantime, automobile production in China and South Korea underwent remarkable growth. The South Korean automobile industry is oriented strongly toward exporting 70 percent of total production in and dominated by the HyundaiKia Automotive Group.

However, newly established automobile production plants and their suppliers have tended to concentrate in three coastal industrial agglomerations Bohai Bay Rim, Shanghai and Guangdong. This is the second largest market for pickup trucks in the world after the USA. For the Thai people, the pickup is attractive because maintenance is easier, and spare parts are cheap and easily available because they are mostly produced locally.

The government sales tax of 3 percent on pickups is over ten times lower than the 30—50 percent rate on passenger cars. In , 1. Domestic sales in were 0. This can be seen as a typical example of the HME whereby countries tend to become net exporters of the goods that they tend to consume in large amounts.

Enhancing scale economies thus enables a wide variety of parts suppliers to locate in Thailand.

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Recent growth experiences of Asian tigers: where does India stand?

Japanese automakers dominate the Thai automobile industry, claiming nearly 90 percent of both the domestic market and exports. Since assembly plants tend to rely on close and informal relationships when dealing with parts suppliers, both are concentrated in the Bangkok metropolitan area and the surrounding central and eastern regions within a km highway distance from Bangkok. Therefore the forces of agglomeration tend to exceed those of dispersal, leading to a small number of concentrations of production at a global scale. East Asia, as shown in Table 2. Shares of other products are based on the volume of production in The forward and backward input—output linkage led to agglomeration in particular locations.

The concept of agglomeration economies also partly explains some industry localization in developed countries. South Korea exhibits strength in the mobile phone industry due to its 32 Basic viewpoints on East Asian economic integration technological lead in adapting the CDMA code division multiple access mobile telecommunication system.

South Korea developed a national project in the early s involving public and private cooperation to introduce CDMA as its national standard. The same can be said about digital still-camera production in Japan, which requires a wide variety of parts produced with sophisticated technology only available in Japan. Japanese semiconductor producers are generally vertically integrated. South Korea is another major actor in the world semiconductor market.

The spatial pattern of South Korean semiconductor producers is similar to that of the Japanese, with strong vertical integration. The evolution in the locating of their production is summarized in Figure 2. Hong Kong 3 1 2 Taiwan United States 3 3 Malaysia s to s China 2 Foundries abroad 3 United 1 States Companies began contracting with offshore fabrication plants to produce water from designs Taiwan 2 3 Philippines Malaysia 3 1 Canada s to 1 China 2 Design abroad Complex global production chains developed as designs may be fabricated in different locations, and water then sent to still other locations for assembly, testing and packaging Multicountry design teams 3 Some design services were offshored, or a part of global teams operating in many countries Taiwan United 1 States 1 2 3 Philippines Malaysia 3 Design teams 2 Fabrication 3 Assembly testing and packaging 1 Source: USGAO , p.

The semiconductor industry in China is still underdeveloped although some foundries set up using local capital are growing rapidly. However, since China has become a major market for electronic devices, some MNEs have made large-scale investments. Within China, the automobile industry is growing in three locations Tianjin, Shanghai and the vicinity of Guangdong , which have attracted foreign investment, in contrast to the traditional auto-production locations designated by the government which brought factories to inland provinces and the northeast.

Hence the current location pattern of the automobile industry can be summarized as: 1 globally concentrated while being distributed to three core economies; 2 regionally dispersed in East Asia; and 3 highly concentrated within each country. Regarding the electronics industry, the locational pattern at the global level exhibits a concentration in East Asia because of the dominance of agglomeration economies over dispersion forces due to lower transport costs.

Dispersion of labor-intensive assembly processes started in the s. Concentration in China is much more intense in the electronics industry; nevertheless, Japan, South Korea and Taiwan preserve certain market shares in products of the most sophisticated type, maintaining innovation-based agglomeration.

Innovationintensive activities tend to localize because of the knowledge externalities created through the interaction of skilled people requiring some face-toface communication. An indication of innovation capacity is shown in Table 2. South Korea has achieved a remarkable increase in innovation capacity. Although it is maintaining its leading position in innovation, indications suggest that Japan as the single core of innovation in the region will not continue; rather the Asian NIEs and China will steadily increase their own innovative capacities, implying the consolidation of a regional structure with multiple cores.

Small developed economies such as Hong Kong and Singapore have already achieved the same income level as Japan. South Korea and Taiwan are rapidly catching up, followed by Malaysia and Thailand, although the latter experienced a serious setback during the currency crisis in the late s. China has shown steady growth since the beginning of the s, escaping from the lowest income group and already exceeding the level of the Philippines and 36 Basic viewpoints on East Asian economic integration 1.

We may infer from the above that the existence of agglomeration economies helps countries to grow faster. Because there is much freer mobility of productive resources intranationally than internationally, the problem of income disparities due to agglomeration forces may be more serious in the context of each country because the core—periphery structure may become clearer.

Higher growth was related to production agglomeration, prompted by exposure to globalization exports and foreign direct investment and economic liberalization reduction in the share for state enterprise. This shows that the disparity increased as the growth of GRP in the richest areas, i. Shanghai, Beijing and Tianjin, was considerably greater than the national average. At the same time, other coastal provinces such as Zhejiang, Jiangsu and Shandong also showed remarkable growth, changing the order.

In the previous section, it was pointed out that these provinces have had a high growth of exports as well as a large share of MNE participation in those exports. Economic growth in Thailand, depicted in Figure 2. However, in most of the provinces with income higher than the national average were in the core regions, and the number of such provinces decreased from 36 in to 14 in , leaving the remaining provinces below the average. It should also be noted that the size of the income gap between the poorer provinces and the national average has widened.

First, within East Asia, some countries attract industries while others do not: the former tend to grow faster while the latter remain at the economic periphery. Its fundamental proposition suggests that a decrease in transport costs may lead to a core—periphery structure of the economy in the location of industrial production. To a large extent the process of economic globalization meets the prediction of the spatial economic perspective.

Recent growth experiences of Asian tigers: where does India stand? | Emerald Insight

At the global level it coincides with the strong concentration of industrial production in North America, Europe and East Asia, which constitute the global core economies. However, due to agglomeration economies, that dispersion spread to some countries and, within them, to a limited number of areas. This resulted in income convergence among regions gaining agglomeration forces, while leaving untouched or even widening the gap between the core 0 Figure 2.

These developments in the East Asian economy point to the following possible policy implications and future research issues: 1 How to promote further regional economic integration Economic integration has brought about the emergence of multiple economic cores. Local economies can take advantage of economies of scale by integrating themselves into the global market. Economically, it may cause too much congestion, leading to degradation of the quality of life in large metropolitan areas.

In the long run, technological development will be necessary in peripheral areas to enable self-support. Such a policy analysis is another issue that spatial economic models will have to deal with. Recent progress in information and telecommunication technology raises this possibility.

This part on intra-regional trade is based on Fujita and Fujita and Hamaguchi See Chapter 3 for a detailed explanation of the HME. Hyundai acquired Kia in See Chapter 9, which examines how Japanese automobile companies choose locations in China compared to Korean companies, discussed in Chapter 8. Baldwin and Wyplosz emphasize this problem in European integration. Anderson, James E. Fan, C. Cindy and Allen J. Fujita, Masahisa, Tomoya Mori, J. Henderson and J. Specialization and agglomeration forces of economic integration Koji Nishikimi 3.

As was argued in Chapter 1, economic integration is expected to exert two opposing influences on industrial location. On the one hand, international difference in comparative advantage leads different industries to locate in different countries. As comparative advantage structure changes over time, industries trickle down from one country to another, in conformity with the flying-geese pattern of industrialization as described in Chapter 2.

As a result of the operation of this force, industries tend to be dispersed over many countries, rather than being localized in a small number of countries and regions. On the other hand, when scale economies of production are significant, firms tend to locate in regions with large markets in order to exploit scale benefits. This is likely to lead to industrial agglomeration in a limited number of regions, leaving other regions vacant. Hence, with significant scale economies, trade liberalization and factor mobilization tend to intensify geographical concentration of industries and regional inequality.

In the following sections, we look more closely at the above two forces. The analysis of the specialization force is carried out on the basis of the neoclassical theory of comparative advantage, in which production processes are assumed to exhibit constant returns to scale. We begin our analysis by reviewing a simple standard model in which two consumer goods are produced from two factors of production. We then introduce the possibility of fragmentation in order to consider situations in which firms separate their production into several blocks and relocate them to other countries.

It will be shown that either with or without fragmentation, trade liberalization promotes efficiency in the international allocation of resources and brings about significant gains from trade. By contrast, the 43 44 Basic viewpoints on East Asian economic integration analysis of the agglomeration force is based on the theory of spatial economics, which differs from neoclassical theory in that it allows for scale economies in production.

This small alteration of assumption provides a theoretical mechanism that explains how regional integration creates economic disparities among member countries as well as among regions within each country. Both specialization and agglomeration forces are expected to become more significant as integration progresses further as a result of the future creation of more FTAs.

The relative potency of the two forces crucially affects regional aspects of economic growth in East Asia. Both forces must be analyzed if there is to be harmonious development of economic integration in East Asia, where much heterogeneity can be seen among countries as regards levels of industrialization, per capita income, and other socio-economic indicators. The remainder of this chapter is organized as follows. The specialization forces are examined in Section 3. In Section 3. Our model here is based solely on the neoclassical theory of comparative advantage. Section 3.

Then, in Sections 3. In this section, we examine the effects of reductions in tariff and non-tariff barriers, and the lowering of international transport costs among integrated countries. After developing an Specialization and agglomeration forces 45 analytical framework in Section 3. Consider a world composed of a large number of small countries. All consumers are assumed to have identical preferences. Each country is endowed with certain amounts of skilled H and unskilled L labor and produces two kinds of goods, H-intensive high-tech goods, M, and L-intensive traditional goods, A, using constant-returns-to-scale technologies.

In these circumstances, factor endowment should be an essential determinant of the comparative advantage of each country: H-abundant countries such as Japan, Korea and Singapore have comparative advantage in production of H-intensive high-tech goods, M, while other L-abundant countries have advantage in L-intensive goods, A. Transport costs Let Countries 1 and 2, respectively, be well endowed with skilled and unskilled labor. In these circumstances, reflecting their comparative advantages, Country 1 exports M goods and imports A goods, while Country 2 exports A and imports M.

Suppose that all international trade is transacted on the world market and necessitates transport costs between this market and each country of the importer or exporter. Then the c. Similarly, the c. Because the world market is competitive, firms encounter completely elastic demand for their products, and hence domestic prices of exported and importcompeting goods are, respectively, equalized to the f. Figure 3. Note that A1 and M2 lie below and to the left of A2 and M1 respectively, because the c.

Since unskilled labor is relatively scarce in Country 1, the relative wage of unskilled labor becomes more expensive in Country 1 than in Country 2. The curve BPD represents the production possibility frontier PPF , while the curve uCu provides an indifference curve of the representative consumer. The equilibrium consumption is shown by point C, which is the tangent point of the trade possibility line and the indifference curve. If we draw a line PIJ that passes through P and follows the slope of the f.

The equilibrium production and consumption in Country 2 can be drawn in a similar way. Consequently, the relative wage of unskilled labor rises when Country 1 levies an import tax on A. Major consequences of elimination of these barriers have been extensively studied in the field of international economics. In this subsection, we demonstrate their essence by using the framework presented above.

Reduction of import tax First, consider the effects of a reduction of import tax. Suppose that the government of Country 1 eliminates the tax on imports of A from Country 2, while retaining the taxes on imports from other countries. The equilibrium points for production and consumption shift back to P and C, respectively, in Figure 3. In this equilibrium, positive profits are obtained by importers in Country 1. In this case, factor prices also remain unchanged. The relative wage of unskilled labor in Country 2 rises toward the wage level in Country 1 if all M imports to Country 2 are substituted by imports from Country 1.

If the substitution is only partial, the tariff reduction exerts no influence on income distribution in Country 2, as in the case of a tariff reduction in Country 1. In general, we can summarize the above results as follows: if a discriminatory tariff reduction in a country causes a substantial change in the domestic product prices in that country, it reduces the difference in the factor prices among the integrated countries and makes the representative consumer in that country better off than before.

An NTB, like any complicated procedure for customs clearance, entails substantial non-pecuniary costs but yields no government revenue. Hence, in our framework, its influences should be analyzed in the same way as an examination of the effects of international transport costs, rather than the effects of import taxes. Yet, as in the case of an import tax, the result of an NTB reduction depends on the export capacity of the trading partners with which the NTB reduction is to be implemented.

In this case, the domestic price of A in Country 1 declines as the import price drops, reflecting the lowering of the NTB. The decline in A price causes a decrease in the production of A and a fall in the demand for unskilled rather than skilled labor. As in the case of tariff reduction discussed in the preceding subsection, this results in a decline of the relative wage of unskilled labor.


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When the export capacity of Country 2 is too limited to dominate the import market in Country 1, the domestic price of A in Country 1 is not influenced by the NTB reduction. In these circumstances, the equilibrium production remains unchanged at P in Figure 3. The difference between the c. In Figure 3. However, the income distribution between skilled and unskilled labor remains the same as before.

In other words, income and expenditure in Country 1 grow proportionally as a result of the NTB reduction. At the same time, the integration causes a convergence in relative wages among the integrated countries. However, in Asia, international division of labor has recently made substantial progress, particularly in the production of intermediate goods. Many enterprises in the automobile and electronics industries, for example, separate several processes of production and relocate them to different countries, according to the market conditions prevalent in each country.

This phenomenon is often called fragmentation and has been intensively studied since the late s. In this subsection, we incorporate fragmentation in our analysis of economic integration, following Arndt , Deardorff , and Jones and Kierzkowski The line DE shows the unit isocost line for Country 2 and is identical to the one shown in Figure 3. Firms will relocate the assembly process to Country 2 if this cost-saving effect exceeds the extra costs of fragmentation, such as costs for transport of parts and components, and intra-firm communications.

In this case, fragmentation occurs and Country 1 specializes in production of z1 and A, while Country 2 specializes in z2 and A. Since the production process of z1 is more skilled-labor-intensive than M production as a whole, the relative wage of skilled labor rises in Country 1 as a consequence of fragmentation. In short, fragmentation in the skilled-labor-intensive sector changes the income distribution in skilled-labor-abundant Country 1 in a direction favorable to skilled labor.

In contrast, the effect on the relative wage in Country 2 depends on the factor intensity of the assembly process, z2. Welfare effects of fragmentation When the total cost of M1 under fragmentation is less than a dollar, as illustrated by Figure 3. Accordingly, the production possibility frontiers PPFs for both Countries 1 and 2 are expanded vertically as a result of the fragmentation. For example, Figure 3. The representative consumer becomes better off as a result of the fragmentation.

Similarly, the fragmentation vertically expands the PPF of Country 2 and improves the economic welfare of the representative consumer in that country, too. In particular, it should be noted that an import tax on the non-fragmentable sector, A, in Country 1 may excessively encourage the fragmentation of M firms in that country. In such a case, firms will decide to accomplish the fragmentation even though it does not, in fact, realize the efficient allocation of production factors.

Such a misallocation occurs because the import tax on A depresses the relative wage of skilled labor, which in turn encourages specialization in the skilled-labor-intensive process, Z1. Hence, in general, elimination of an import tax in the process of economic integration removes these distortions in incentives for fragmentation and improves the efficiency of factor allocation in the integrated countries. As in the case of Figure 3. If fragmentation is achieved in the situation depicted in Figure 3. Similarly, we can show that the introduction of an import tax on M in Country 2 may cause economic welfare to deteriorate because of the distorting influence of the tax on the incentives for firms to undertake fragmentation.

In particular, an import tax on traditional goods in industrialized countries, which often causes persistent obstruction of economic integration, might also inflict serious damages on those industrialized countries by stimulating excess fragmentation and relocation of their industries. The main result, from this point of view, is that trade liberalization is beneficial for consumers in the integrated countries, while it creates different effects on income distribution in different countries. Accordingly, in this approach, there is no systematic force whereby economic integration creates or enlarges income differences among integrated countries and among regions within each country.

In reality, however, regional disparities in production and income are often reported to be accelerated by integration, as was discussed in Chapter 1. In this section, invoking the framework of spatial economics, we examine the main mechanism whereby integration magnifies regional disparity. Let us now introduce the factor of scale economies in the production of manufactured goods.

We then assume that domestic transportation carries no cost, while international transportation entails significant cost. In these circumstances, if M firms produce the same homogeneous good, all domestic production of M should be supplied by a single firm as a result of competition.

In this case, M firms operating in 60 Basic viewpoints on East Asian economic integration countries with large markets tend to be more productive and hence more competitive in the world market. Exports bring more production and higher efficiency to those firms, and this, in turn, lowers the domestic price of M, which makes the consumers in the country concerned better off. In short, the size of the home market affects the real income utility of the consumers in that market. This mechanism is often called the HME. The above account of a natural monopoly with homogeneous M products gives a simple and clear picture of HMEs, but the result might seem to heavily rely on the monopolistic structure of the M market, something that is seldom observed in the real economy.

Readers may wonder if HMEs can be obtained even when the market is not purely monopolistic.

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When manufactured goods are not homogeneous but slightly differentiated from each other, there should be multiple or even many producers at an equilibrium. Such situations are lucidly described by the monopolistic competition model of Dixit and Stiglitz In this model, each firm exhibits increasing returns to scale, and hence each variety of manufactured good, Mi, becomes cheaper as its home market becomes larger. When the price of Mi declines, however, consumers may spend their spare money to buy a new variety of M, rather than to increase their purchase of the existing varieties.

In fact, at the equilibrium of monopolistic competition in Dixit and Stiglitz , market size does not affect the production quantity of each firm but increases the number of varieties of manufactured good. In this case, however, consumers enjoy higher utility by consuming a wide variety of the M good. Accordingly, the size of market affects the real income, and the HMEs are therefore at work for many M firms, too. Baldwin et al. Nishikimi extends their footloose capital model to a three-country case and examines how integration affects production and income disparities across countries.

Suppose that K is internationally mobile without cost, while labor is immobile across countries. The A sector produces homogeneous goods, while the M sector supplies differentiated products, Mi. For the sake of simplicity, we assume that all varieties of M are produced using the same technology which requires labor in proportion to the output and a fixed amount of capital. Note that this type of technology exhibits scale economies: average cost decreases as production increases, due to the existence of a fixed input.

Production of the homogeneous A good, by contrast, is assumed to require only the proportional input of labor and hence exhibits constant returns to scale. As in Section 3. To keep the analysis simple, costs of international transport of A and any domestic transport, in contrast, are assumed to be zero. Markets of K, L and A are in perfect competition, whereas the M market is characterized by Dixit—Stiglitz monopolistic competition.

Following Baldwin et al. Equilibrium Let us now look at the equilibrium location of M firms among the three countries. Let us first consider a symmetric case in which the three countries are endowed with identical quantities of labor and capital. For this world economy, there exists a stable equilibrium. Under the simplified settings presented above, we can separately draw the figures of the trade equilibrium within the integrated economy right-hand side of Figure 3. Curve NN appears in linear form, again because of the setting of independent national income noted above. The curve slopes upward as capital is attracted to the countries with large income and markets.

Moreover, it should be noted that because of HMEs, the share of M production disproportionately increases as the relative size of the domestic markets increases; hence the slope of NN is larger than The right side of Figure 3. As in the left side of the figure, the kinked line nn shows the values of s1E and s1n which equalize the operating profits in Countries 1 and 2,23 and the line ee depicts the expenditure share of Country 1.

Here, we focus on the analysis of the influences of changes in transport costs. Suppose that the transport cost between Countries 1 and 2, TM, falls because of progress in economic integration. This lowers the c. As a result, the line NN0 in Figure 3. By contrast, the effects on the relative share of M production within the integrated economy are a little more complicated.

Therefore, the line nn0 rotates anticlockwise to nn1 in the right side of Figure 3. As trade n liberalization progresses between Countries 1 and 2, these two countries gain larger shares of M production because of the HME, and consumers in these countries enjoy higher economic welfare because they can purchase their domestic products at lower prices without bearing transport costs. Now let us consider a case where the two integrated countries differ in size.

As integration progresses, the difference in the share of M production within the integrated economy becomes wider, as shown in Figure 3. Volume 21 Volume 20 Volume 19 Volume 18 Volume 17 Volume 16 Volume 15 Volume 14 Volume 13 Volume 12 Volume 11 Volume 10 Volume 9 Volume 8 Volume 7 Volume 6 Volume 5 Volume 4 Volume 3 Volume 2 Volume 1 Jafari Samimi, A. Iranian Economic Review , 23 1 , Iranian Economic Review , 23, 1, , Iranian Economic Review , ; 23 1 : The considered channel for this effectiveness is the availability of credit to firms in various regions and the effects on the labor and consumer welfare.

For this purpose, data for manufacturing firms located in 30 different provinces in Iran during and gathered. The empirical results from spatial panel data show that beside conventional channel of effectiveness through consumer and labor force utility function, regional monetary policy implication through uneven distribution of regional loanable banking fund seems to be substantial centripetal force. In terms of most well-known NEG variable, uneven regional accessibility of credit market has opposite regional implication as trade freeness.

While the former leads to more concentration of economic activity across space, the latter tends to drive dispersion. It is assumable that monetary policy reduce the impact of credit constraints on firms but the degree of credit availability in regions is a significant driver for concentration of economic activity.

The result shows the importance of accessibility to banking loans on distribution of economic activities within the country. Cheltenham: Edward Edgar Publishing. Arena, M. Firm Location and Corporate Debt. Artis, M. Retrieved from. Ascani, A. New Economic Geography and Economic. Atanasova, C. Azzoni, C. Bacolod, M. Skills in the City. Baldwin, R.

Reports & Publications

Agglomeration and Endogenous Capital. Core-periphery Model with Forward-looking Expectations. Public Policies and Economic Geography. Princeton: PUP. Baltagi, B. Testing Panel Data. Regression Models with Spatial Error Correlation. Journal of Econometrics , 1 , Barro, R. Convergence across States and Regions.

Bebchuk, L. Becker, B.


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    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics
    Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics Economic Integration in East Asia: Perspectives from Spatial and Neoclassical Economics

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