Internal Geography, International Trade, and Regional Specialization

Kerem Coşar · Pablo Fajgelbaum

189 citations0/0 files storedAmerican Economic Journal Microeconomics

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Global trade and economics Regional Economics and Spatial Analysis Economic and Technological Innovation

Abstract

We introduce an internal geography to the canonical model of international trade driven by comparative advantages to study the regional effects of external economic integration. The model features a dual-economy structure, in which locations near international gates specialize in export-oriented sectors while more distant locations do not trade with the rest of the world. The theory rationalizes patterns of specialization, employment, and relative incomes observed in developing countries that opened up to trade. We find regional specialization patterns consistent with the model in industry-level data from Chinese prefectures. (JEL F11, O18, P23, P25, P33, R12, R32)

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References

1990Increasing Returns and Economic Geography 2006The Log of Gravity 2002Technology, Geography, and Trade 1990Scale Economies, Product Differentiation, and the Pattern of Trade 1965Trade Liberalisation and “Revealed” Comparative Advantage 1 1986Market Structure and Foreign Trade 2006Globalization and the Gains From Variety 2007Misallocation and Manufacturing TFP in China and India

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