Perspectives from Spatial and Neoclassical Economics
Edited by Masahisa Fujita, Satoru Kumagai and Koji Nishikimi
Chapter 3: Specialization and Agglomeration Forces of Economic Integration
Koji Nishikimi INTRODUCTION 3.1 This chapter, illustrated with graphs and diagrams, makes clear the theoretical basis of our main view as presented in the preceding chapters. As was argued in Chapter 1, economic integration is expected to exert two opposing inﬂuences on industrial location. On the one hand, international difference in comparative advantage leads different industries to locate in different countries. As comparative advantage structure changes over time, industries trickle down from one country to another, in conformity with the ﬂying-geese pattern of industrialization as described in Chapter 2. Here we deﬁne this inﬂuence as the ‘specialization force of economic integration’. As a result of the operation of this force, industries tend to be dispersed over many countries, rather than being localized in a small number of countries and regions. On the other hand, when scale economies of production are signiﬁcant, ﬁrms tend to locate in regions with large markets in order to exploit scale beneﬁts. This is likely to lead to industrial agglomeration in a limited number of regions, leaving other regions vacant. Hence, with signiﬁcant scale economies, trade liberalization and factor mobilization tend to intensify geographical concentration of industries and regional inequality. We call this inﬂuence the ‘agglomeration force of economic integration’. In the following sections, we look more closely at the above two forces. The analysis of the specialization force is carried out on the basis of the neoclassical theory of comparative advantage, in which production processes are assumed to...
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