Emerging Trade Patterns in a 3-Region Linear NEG Model: Three Examples

Commendatore, Pasquale and Kubin, Ingrid and Sushko, Iryna (2017) Emerging Trade Patterns in a 3-Region Linear NEG Model: Three Examples. In: The Economy as a Complex Spatial System. Springer, Cham. pp. 38-80. ISBN 978-3-319-65627-4

Available under License Creative Commons: Attribution 4.0 International (CC BY 4.0).

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This chapter draws attention to a specific feature of a NEG model that uses linear (and not iso-elastic) demand functions, namely its ability to account for zero trade. Thus, it represents a suitable framework to study how changes in parameters that are typical for NEG models, such as trade costs and regional market size, not only shape the regional distribution of economic activity, but at the same time determine the emergence of additional trade links between formerly autarkic regions. We survey some related papers and present a three-region framework that potentially nests many possible trade patterns. To focus the analysis, we study in more detail three specific trade patterns frequently found in the EU trade network. We start with three autarkic regions; then we introduce the possibility that two regions trade with each other; and, finally, we allow for one region trading with the other two, but the latter are still not trading with each other. We find a surprising plethora of long-run equilibria each involving a specific regional distribution of economic activity and a specific pattern of trade links. We show how a reduction in trade costs shapes simultaneously industry location and the configuration of the trade network.

Item Type: Book Section
Keywords: Two-dimensional piecewise smooth map, Multistability, Basin of attraction New Economic Geography model, Three-region models, Trade patterns.
Divisions: Departments > Sozioƶkonomie > Sozialpolitik > AuƟenwirtschaft
Version of the Document: Published
Variance from Published Version: None
Depositing User: Mohammad Al Hessan
Date Deposited: 22 Jan 2018 12:15
Last Modified: 01 Aug 2020 18:29
Related URLs:
URI: https://epub.wu.ac.at/id/eprint/5991


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