Year: 2007
Type: preprint
Abstract: This paper explains why capital does not ‡ow from the North to the South-the Lucas Paradox- with a New Economic Geography model that incorporates mobile capital, immobile labour, and productively heterogeneous …rms. In contrast to neoclassical theories, the results show that even a small di¤erence in the ex-ante productivity distribution between North and South can a have huge impact on the location of …rms. Despite di¤erences in aggregate capital to labour ratios, wage and rental rates continue to be the same in both locations. The paper also analyses the e¤ects of risk on industrial locations, and shows why ‘low tech ’ industries tend to migrate to the South, while ‘high tech’industries continue to locate in the North. I
Author: Jang Ping Thia
Institution: London School of Economics and Political Science
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2136338924