Globalization, Interregional and International Inequalities


This paper examines interregional and international inequalities in a setup of two countries and four regions. Different from the existing literature, countries and regions are not required to be symmetric in size. Capital but not labor is mobile across regions and countries. We find that the interregional and international inequalities are closely related to globalization and the efficiency of local governance. In other words, they are jointly determined by the domestic transport costs (e.g., infrastructure, administrative barriers, etc) in the two countries and the international trade cost. Particularly, the interregional inequality may be either a monotonically increasing or an inverted U-curve function of its own domestic transport costs. Also, the interregional inequality decreases with the national manufacturing share. These results shed light on the so-called "deindustrialization" phenomenon.

Keywords: Regional Inequality
       Firm Location

JEL Classification: R12

Dao-Zhi ZENG
Graduate School of Management, Kagawa University

Laixun ZHAO
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: (81) 78 803 7036
Fax: (81) 78 803 7059