Spatial inequality between developed and developing economies

Abstract

AbstractBearing in mind that developing countries have less capital and less advanced technologies, this paper theoretically investigates the joint impact of two first‐nature forces, Ricardian and Heckscher‐Ohlin advantages and the second‐nature force on spatial income inequality. We establish a new economic geography model without a traditional sector so that the wages are not equalized. By combining these three kinds of trade forces, we show how spatial income inequality changes with economic integration. Four evolution patterns are obtained which are consistent with diverse empirical results in the literature.