International Handbook on the Economics of Integration, Volume II
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International Handbook on the Economics of Integration, Volume II

Competition, Spatial Location of Economic Activity and Financial Issues

Edited by Miroslav N. Jovanović

With this Handbook, Miroslav Jovanović has provided readers with both an excellent stand-alone original reference book as well as an integral part of a comprehensive three-volume set. This introduction into a rich and expanding academic and practical world of international economic integration also provides a theoretical and analytical framework to the reader, presenting select analytical studies and encouraging further research.
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Chapter 11: Regional Integration of Production Systems and Spatial Income Disparities in East Asia

Masahisa Fujita and Nobuaki Hamaguchi


Masahisa Fujita and Nobuaki Hamaguchi 1 INTRODUCTION From a global perspective, the landscape of economic activities is highly uneven. In 2007, about 80 per cent of world GDP was concentrated in three regions: the European Union (EU) accounts for 31.0 per cent; NAFTA (the North American Free Trade Agreement: USA1Canada1Mexico) 29.8 per cent; and East Asia 18.7 per cent.1 These three regions also accounted for about 70 per cent of the world trade in the same year.2 If we narrow the focus to the East Asian region, we can see a few mega cities whose densely agglomerated economic activities, connected to the world market, prosper dynamically, compared to a large part of the region, occupied in traditional production, achieving only slower economic growth and generating massive out-migration. Recently, the World Bank (2008) underlined that one of the driving forces of the current world economy is the ‘density’ of economic activities. It is among high-density locations that most international trade and business deals are taking place, creating a regional network of an exchange of goods and ideas, supported by a modernised transport infrastructure together with efficient logistic services that reduce economic distance. Because of higher profitability thanks to economies of scale, firms of modern economic activities that are open to the world market are willing to pay higher wages to workers in high-density locations. Since distance from such locations influences the income of workers, people move to the big cities in search of better economic opportunities. Migration from the hinterland gives...

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