Ricardian Comparative Advantage and Geographical Concentration

18 Pages Posted: 25 Oct 2011

See all articles by Toshihiro Okubo

Toshihiro Okubo

University of Geneva - Graduate Institute of International Studies (HEI)

Date Written: November 2011

Abstract

This paper analyses geographical concentration using the continuum‐of‐goods trade model in the presence of labor migration, Ricardian comparative advantage and Marshallian‐type external increasing returns to scale. The findings show that higher transportation costs lead to concentration in one region, and lower transportation costs lead to diversification between the regions. For intermediate transportation costs, asymmetric diversification becomes a stable equilibrium in which the smaller population region has higher wage rates and a smaller externality, and vice versa. However, because the asymmetric equilibrium is an inefficient outcome, it leaves room for government intervention.

Suggested Citation

Okubo, Toshihiro, Ricardian Comparative Advantage and Geographical Concentration (November 2011). Review of Development Economics, Vol. 15, Issue 4, pp. 620-637, 2011, Available at SSRN: https://ssrn.com/abstract=1948930 or http://dx.doi.org/10.1111/j.1467-9361.2011.00631.x

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University of Geneva - Graduate Institute of International Studies (HEI) ( email )

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