First Nature vs. Second Nature Causes: Industry Location and Growth in the Presence of an Open-Access Renewable Resource

González-Val, Rafael and Pueyo, Fernando (2009): First Nature vs. Second Nature Causes: Industry Location and Growth in the Presence of an Open-Access Renewable Resource.

Abstract

In this paper we present a model integrating characteristics of the New Economic Geography, the theory of endogenous growth and the economy of natural resources. This theoretical framework enables us to study explicitly the effect of “first nature causes” in the concentration of economic activity, more specifically, the consequences of an asymmetrical distribution of natural resources. The natural resource we consider appears as a localized input in one of the two countries, giving firms located in that country a cost advantage. In this context, after a decrease in transport costs, firms decide to move to the country with the greatest domestic demand and market size, where they can take more advantage of increasing returns, despite the cost advantage of locating in the South, due to the presence of the natural resource.

• Item Type: MPRA Paper
• Language: English
• Keywords: industrial location; endogenous growth; renewable resource; geography
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q20 - General; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies

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