Munich Personal RePEc Archive

Capital liberalization, industrial agglomeration and wage inequality

Li, Yao (2007): Capital liberalization, industrial agglomeration and wage inequality.

[img]
Preview
PDF
MPRA_paper_11355.pdf

Download (217Kb) | Preview

Abstract

This paper sets up a new economic geography model with diminishing marginal returns and examines the effect of capital liberalization on industrial agglomeration and wage inequality. The simulation results indicate that for the country with strict capital controls, capital liberalization can help reduce wage difference between countries in both nominal and real terms. It is also shown that when both comparative advantage and agglomeration are in effect, low trading costs does not necessarily cause the catastrophic agglomeration in the country with the larger market as most other NEG models predict.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.