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Journal of Economic Integration 2010 June;25(2) :353-375.
DOI: https://doi.org/10.11130/jei.2010.25.2.353
Capital Heterogeneity, Industrial Clusters and Environmental Consciousness
Sotiris Karkalakos 
Keele University
Copyright ©2010 Journal of Economic Integration
ABSTRACT

It is shown in the context of a new economic geography that when capital is heterogeneous - degree of environmental sensitivity - trade liberalization may lead to industrial agglomeration and inter-regional trade. Capital heterogeneity gives local monopsony power to firms but also introduces variations in the quality of the match. Matches occur, under environmental consciousness assumption, giving rise to an agglomeration force, which can offset the forces against, trade costs and the erosion of monopsony power. A robust agglomeration equilibrium is derived analytically and shows that pollution can provide a motive for trade by spatially concentrated industries with environmental sensitivities.

JEL Classification: F10, Q20, R12

Keywords: Agglomeration | Pollution | Matching
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Financial Heterogeneity in a Monetary Union  2013 September;28(3)
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