Regional Inequality Surges as Trade Costs Shift Industry Across Locations
The article explores how regional integration affects differences in production structures and income levels. When trade costs are high, industries are spread out to meet consumer demand. With moderate trade costs, industries tend to cluster together due to factors like migration and input-output connections. Workers moving to areas with more firms and higher wages intensify this clustering. However, when workers don't move much and trade costs are low, industries spread out again due to cost considerations.