Factor Mobility, Economic Integration, and the Location of Industry
This paper examines the importance of factor mobility within countries for the manifestation of agglomeration and location effects emphasized in the new economic geography literature. Working with a model of trade under monopolistic competition, the relationship of factor mobility (in particular labor) to industry adjustment and relocation is developed analytically, and then illustrated with a computational example. The computational exercise involves a notional reduction in trading costs within the European Union.
KeywordsProduction Frontier Imperfect Competition Factor Mobility Global Trade Analysis Project Average Cost Price
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