Heckscher-Ohlin and agglomeration

Research output: Journal PublicationArticlepeer-review

13 Citations (Scopus)

Abstract

We argue that embedding endowment-based comparative advantage within a standard NEG framework helps solve the indeterminacy due to multiple equilibria and the ambiguity concerning the relation between integration and specialisation (monotonicity versus non-monotonicity) typical of the NEG literature. In particular, we show that if endowments are in the FPE set, the process of trade integration involves an overshooting of international specialisation and relative factor prices with respect to the free trade level determined by factor abundance. In contrast, if endowments are outside the FPE set, then, even in the presence of agglomeration forces, specialisation and factor prices are monotonically related to trade costs, as implied by the standard trade theory. We argue that the model can shed light on some puzzling stylised facts.

Original languageEnglish
Pages (from-to)645-657
Number of pages13
JournalRegional Science and Urban Economics
Volume35
Issue number6
DOIs
Publication statusPublished - Nov 2005
Externally publishedYes

Keywords

  • Factor abundance
  • Integration
  • New Economic Geography
  • Specialisation
  • Stolper-Samuelson

ASJC Scopus subject areas

  • Economics and Econometrics
  • Urban Studies

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