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Natural Advantage Effect, Location And Trade Patterns In Increasing Returns To Scale Industries

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  • Gaetano Alfredo Minerva

Abstract

In a two sectors, two regions economy I show that the higher the increasing returns to scale of an industry, the more easily it will concentrate in response to natural advantage (giving rise to what I call Natural Advantage Effect). To this end, one sector is assumed to be perfectly competitive and the other is monopolistically competitive, with a region's firms producing at a lower marginal cost than the others in the monopolistic sector (or equivalently producing varieties more intensely demanded by consumers). If capital is mobile between regions in the long run, I analytically characterize the process of industrial location of the imperfectly competitive sector in the region with the natural advantage.

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  • Gaetano Alfredo Minerva, 2007. "Natural Advantage Effect, Location And Trade Patterns In Increasing Returns To Scale Industries," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 19(1), pages 21-48, March.
    • Handle: RePEc:bla:revurb:v:19:y:2007:i:1:p:21-48
    DOI: 10.1111/j.1467-940X.2007.00124.x
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    Cited by:

    1. Timothy C. Ford & Brian Logan & Jennifer Logan, 2009. "NAFTA or Nada? Trade's Impact on U.S. Border Retailers," Growth and Change, Wiley Blackwell, vol. 40(2), pages 260-286, June.
    2. Anke Kutschke & Alexandra Rese & Daniel Baier, 2016. "The Effects of Locational Factors on the Performance of Innovation Networks in the German Energy Sector," Sustainability, MDPI, vol. 8(12), pages 1-18, December.

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