Industrial Structure, Trade And Regional Economics: Market Segmentation
The authors consider a general equilibrium model a la Bhaskar (Review of Economic Studies 2002): there are complementarities across sectors, each of which comprises (many) heterogeneous monopolistically competitive firms. Bhaskar's models are extended in two directions: production requires capital, and labor markets are segmented. Labor market segmentation models the difficulties of labor migrating across international barriers (in a trade context) or from a poor region to a richer one (in a regional context), whilst the assumption of a single cap-ital market means that capital flows freely between countries or regions. The model is solved analytically and a closed form solution is provided.