Hajime Takatsuka

Spatial inequality, globalization, and footloose capital

This paper shows the equivalence of spatial inequalities in industrial location and in income by revisiting the home market effect (HME) without any homogeneous good based on a reconstructed footloose capital model. In this simple framework, spatial inequalities in industrial location and in income are the HMEs in terms of firm share and wage, respectively. We show that the larger country has a more-than-proportionate share of firms and a higher wage. Furthermore, both the wage differential and the industrial location in the larger country evolve in an inverted U-pattern when transport costs decline. Finally, we analytically examine the effects of trade liberalization on the welfare and show that both countries may gain from globalization.

Mobile capital and the home market effect

The home market effect (HME) reveals how industrial location depends on country size. One-factor or immobile-labor models are employed in early studies of the HME, in which the transport costs of the homogeneous good are found to be essential. In more recent literature, two-factor models, with the addition of mobile capital, are also used. This paper compares these models and obtains the following results. First, mobile capital brings the existence of the HME for any transport costs of the homogeneous good. In addition, in a two-factor model, a larger share of capital may result in a smaller firm share, and firms may relocate to a smaller country when the homogeneous good market is more integrated.

DISPERSION FORMS: AN INTERACTION OF MARKET ACCESS, COMPETITION, AND URBAN COSTS

This paper analyzes a two-region model including multiple industries with different transport costs. Two results are derived. First, dispersion occurs for small transport costs, but the specific dispersion patterns depend on the level of urban costs. This results from an interaction of the market-access effect on consumers, the market-access effect on firms, the competition effect, and the urban-cost effect. Second, decreasing transport cost tends to let industries with lower transport costs disperse, although the shares of industries locating in the larger region are not in order of their transport costs. We further provide some empirical data concerning the second result.

Mobile Capital and the Home Market Effect (Et Effet D’Attraction Du Marché Domestique)

Most existing studies examine the home market effect (HME) in a framework with immobile labour as the only production factor and the assumption of a freely traded homogeneous good is known to be crucial for the HME to emerge. This study explores the HME in the presence of mobile capital by use of a footloose capital model allowing for positive transport costs of the homogeneous good. The mobile capital generates a channel to offset the trade imbalance of a country. As a result, the HME always appears for arbitrary transport costs in both sectors of differentiated and homogeneous goods. La plup art des travaux existants etudient l’effet du marche domestique dans un cadre d’analyse ou le travail immobile est le seul facteur de production et ou le postulat d’un bien homogene librement echange est considere comme un element crucial pour que l’effet du marche domestique emerge. Ce texte explore le phenomene dans le cas ou le capital est mobile et ou on utilise un modele de capital libre comme l’air avec couts de transport positifs pour le bien homogene. Le capital mobile engendre un canal pour compenser le desequilibre commercial d’un pays. En consequence, l’effet du pays domestique apparait toujours pour des couts de transport arbitraires dans les secteurs des biens differencies ou homogenes.

ECONOMIC GEOGRAPHY OF FIRMS AND SKILLED LABOR

This paper investigates the relationship between firm location and skilled‐labor location. While existing new economic geography (NEG) models could not explicitly analyze the relationship due to their assumptions, I construct a new NEG‐type model allowing for different location dynamics of firms and skilled labor for this objective. The main results are as follows. First, a relatively large pool of skilled labor attracts firms when trade costs are small, while it might repel firms when trade costs are sufficiently large. Second, assuming that skilled workers are mobile between regions, the model shows that skilled workers agglomerate faster than firms with decreasing trade costs. Third, the model supports the hypothesis that firms follow skilled labor rather than the reverse. These results are consistent to Indian and Chinese experiences, and some “creative‐class” or “skilled‐city” stories.

Does globalization foster economic growth

This article focuses on two distinct faces of globalization: the decrease in trade costs of goods and the decline of affiliation costs of joint ventures by foreign firms with local firms. The decrease of affiliation costs drives relocation of firms from the North to the South. When the market size of the North is relatively small (resp. large), the growth rate monotonously decreases (resp. first decreases and rises after this) with a decline of affiliation costs. In the case of lowering trade costs, the firm share in the North evolves as a U-shaped curve (resp. monotonously increases) when the market size of the North is relatively small (resp. large). Growth rates are raised with agglomeration in the North. Finally, we present some welfare implications.

Elastic Labor Supply, Variable Markups, and Spatial Inequalities

Assuming an inelastic labor supply, existing studies on spatial inequalities across countries show that a larger country has the advantages of a higher wage rate and a higher individual income. This paper reexamines these results by use of a model with an endogenous labor supply and variable markups. We find that both advantages can be reversed. Specifically, if the love for variety is strong and trade costs are high, the wage rate is lower but the individual income is higher in the larger country. However, if the love for variety is weak and trade costs are low, the wage rate is higher but the individual income may be lower in the larger country.

Who are the Winners and the Losers?: Relocation Effects of Emission Credit Trading

In this paper, we explore who are the winners and losers of the emission control policy via credit trading and the carbon-offset program. To focus on the long-term effects of firm relocation, we employ a two-region model of monopolistic competition and assume that the rural area has an advantage in terms of the availability of absorption sources. The main findings are as follows. First, without carbon-offset programs, strengthening the emission controls drives firms to relocate from the rural to the urban area, where the relative welfare is improved. Second, in the case with a carbon-offset program, strengthening emission controls has mixed effects, and the transport cost of firm products is a key parameter. When the transport cost is sufficiently high, the introduction of emission controls with an offsetting system lowers the firm share and the relative welfare in the urban area, while the reverse occurs when the transport cost is low. Finally, in the case allowing for labor mobility, the results are similar to the immobile-labor case with lower transport costs if the initial equilibrium is interior. This story tells us that some redistribution policies might be required under the emission control with/without carbon-offset programs.

Industrial configuration in an economy with low transportation costs

We examine how the spatial economy with multiple industries is shaped when interregional trade costs and intraregional commuting costs are low. All industries are characterized by increasing returns to scale and monopolistic competition, and they are differentiated by their trade costs and the degree of intra-industry competition measured by their firm numbers. We find some distinct rules in industrial location. First, at most, one industry disperses, while others agglomerate in a region according to their ratios of relative trade costs to firm numbers. Second, industries with stronger competition constitute a smaller region, while those with higher trade costs compose a larger region. The results are consistent with the classical Weberian location theory and suggest that the degree of intra-industry competition also becomes an essential factor to determine industrial location when transportation costs are small. Finally, the population differential between the regions monotonically decreases in the relative commuting cost.

Resource-Based Regions, the Dutch Disease and City Development

This paper examines the relationship between resource development and industrialization. When transport costs are high, regions with more valuable natural resources offer higher welfare than other regions. However, when transport costs decrease, firms begin to move out of the region, resulting in the Dutch disease, initially in terms of industry shares, but eventually in terms of welfare too when transportation is sufficiently free. If resource goods are also used as manufacturing inputs as well as final goods, they can substitute for labor when wages rise, which tends to alleviate the Dutch disease by keeping production costs down. The model thus provides helpful insight for cities trying to develop efficiently their limited resources.