Multi-Regional Growth, Agglomeration and Land Values in a Generalized Heckscher-Ohlin Trade Model

This paper builds a general equilibrium interregional trade model with any number of regional economies by unifying the Solow-Uzawa growth and Heckscher-Ohlin (H-O) trade theories. We study the roles of population, land, preferences and technological differences between regions in determining dynamics of national wealth, patterns of interregional trade, economic structures, and income and wealth distributions between different regional households in a general equilibrium dynamic framework. The paper deals with endogenous wealth accumulation, land values, residential land-use, and labor and capital distribution between sectors and between regions under perfectly competitive markets and free trade. Each region has three sectors, producing one national homogenous tradable capital good, specifying in producing one tradable commodity, and supplying non-tradable goods and services. We simulate the model to show existence of an equilibrium point and movement of the interregional economy. We examine the effects on the equilibrium point in exogenous changes of the land, the population, a region’s amenities, and the preferences for a regional good, saving, housing, and residential density.