Internal geography, international trade, and regional specialization

Author / Creator

Coşar, Kerem

Available as

Online

Summary

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 ...

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. Our empirical analysis based on industry-level data from Chinese prefectures demonstrates that international trade is an important driver of industry location within China as the theory implies.

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