We analyze the effects of local market size and accessibility on the spatial distribution of economic activity
and wages in general equilibrium trade models with many asymmetric countries and costly trade for all goods.
In models with a homogeneous sector, local market size is generally more strongly correlated with a country’s
industry share, whereas accessibility better explains a country’s wage. We analytically show that result in a
simplified case and then confirm it using simulations with random trading networks. In models with only differentiated
sectors, both local market size and accessibility are highly correlated with wages. The impact of local
market size on industry location is more robust than the impact of local market size on wages in economic
geography models.
BARBERO JIMENEZ Javier;
KRISTIAN Behrens;
ZOFÍO Jose L.;
2018-05-17
ELSEVIER SCIENCE BV
JRC106670
0166-0462,
https://www.sciencedirect.com/science/article/pii/S0166046218300243,
https://publications.jrc.ec.europa.eu/repository/handle/JRC106670,
10.1016/j.regsciurbeco.2018.04.005,
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