This paper considers how imperfect capital mobility affects spatial inequalities in income and industrial location. The framework of Takahashi et al. (2013) is applied to investigate the effects of integrating the capital market. Several new findings are obtained. First, the inequality in nominal income displays a bell-shaped relationship with falling trade costs if capital mobility is not too low. Second, keeping the trade costs fixed, the inequalities in nominal income and industrial location behave differently when the capital market is integrated. Finally, integration of the product market and integration of the capital market have different impacts on inequality in real income. This explains why empirical findings on spatial inequalities are mixed.
- Capital mobility
- Spatial inequality
ASJC Scopus subject areas
- Sociology and Political Science
- Economics, Econometrics and Finance(all)
- Organizational Behavior and Human Resource Management