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The Impact Of Exogenous Asymmetry On Trade And Agglomeration In Core-periphery Model

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Executive Summary

The paper studies the Krugman's CP model in the weakly explored case of asymmetric regions in two settings: international trade and agglomeration processes. First setting implies that the industrial labor is immobile, while second one considers mobile industrial labor and long-run equilibria. Analytical study of both settings requires application of advanced mathematical analysis, e.g. implicit function theory. For international trade the authors find how equilibrium prices, production, consumption, wages and welfare for all population groups respond to shifts in all exogenous parameters: characteristics of utility function, transportation costs and degree of asymmetry in initial labor endowment.

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