Reduction analysis of hierarchical spatial economy: Trade strategy around Brexit

Ikeda, Kiyohiro and Kogure, Yosuke and Aizawa, Hiroki and Takayama, Yuki (2025): Reduction analysis of hierarchical spatial economy: Trade strategy around Brexit.

Abstract

This paper investigates how international trade competition influences cross-country migration by using a general equilibrium model of economic geography. We employ a global--local system to represent local places grouped into countries, which collectively form a global network. Through the place-to-country reduction analysis proposed herein, the governing equation at the place level are reduced to a country-level equation that efficiently describes each country’s trade environment. We model and analyze international trade competition---including trade liberalization and protectionism---among the UK, France, and Germany, using the Helpman (1998) model. The recommended strategies for the UK and the EU include reducing domestic transportation costs, while tariffs and retaliatory tariffs act as a double-edged sword, potentially enhancing or undermining their trade positions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Brexit, economic geography model, global--local system, hierarchical spatial economy, reduction analysis, tariffs, trade liberalization, trade strategy.
• Subjects: F - International Economics > F1 - Trade > F15 - Economic Integration; F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity

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