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A Calibrated Trade Model of Agglomeration

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  • Paul Friesen
  • Stephen Kosempel

Abstract

This paper explores just how good the idea of international agglomeration of industry can be at explaining observed economic differences between countries. An international trade model with industrial agglomeration is outlined and calibrated to real data from the world's 10 largest countries by population, in order to assess how well it can explain the gap between rich and poor countries, observed trade volumes, price differences, and other types of data. The model is revealing in showing that, given the existing location of labor, an asymmetric exogenous distribution of firms is enough to generate income disparity and other stylized facts.

Suggested Citation

  • Paul Friesen & Stephen Kosempel, 2010. "A Calibrated Trade Model of Agglomeration," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 714-729, September.
    • Handle: RePEc:bla:reviec:v:18:y:2010:i:4:p:714-729
    DOI: 10.1111/j.1467-9396.2010.00898.x
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    Cited by:

    1. Chenggang Wang & Tiansen Liu & Jinliang Wang & Dongrong Li & Duo Wen & Polina Ziomkovskaya & Yang Zhao, 2022. "Cross-Border E-Commerce Trade and Industrial Clusters: Evidence from China," Sustainability, MDPI, vol. 14(6), pages 1-22, March.

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    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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