TITLE:
Globalization, Regional Productivity, Taste Bias and Internal Spatial Distribution
AUTHORS:
Dionysios Karavidas
KEYWORDS:
Globalization, Regional Productivity, Consumer Taste Bias, Internal Geography
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.3,
February
26,
2018
ABSTRACT: I consider an integrated model consisting of a
system of two symmetric regions and the rest of the world that features 1) globalization, 2) regional heterogeneity in
productivity, and 3) taste bias over domestic
and foreign goods as key determinants of spatial agglomeration. I show that
falling external trade barriers favor internal agglomeration. Moreover, a
reduction in relative productivity compensates for the trade barriers between the
two symmetric regions and the rest of the world; this also favors internal
agglomeration of the mobile factor. In addition, I consider two cases of taste
bias namely ethnocentrism and xenocentrism. I find that a shift of consumer
preferences in the two symmetric regions with respect to goods that are made in
the rest of the world results in internal agglomeration, too. Finally, a shift
of consumer preferences in a region with respect to goods that are made in the
other region results 1) in internal agglomeration
under ethnocentrism, and 2) in internal dispersion under xenocentrism.