Factor mobility, trade and 'regional' economic differences: What story should we tell our grandchildren?

Date

1998

Author

Thirlwall, A.P.

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Neoclassical economic theory predicts thatrcgional differences in per capita income levels and unemployment may be explained by factor mobility and trade. The paper argues that the predictions of neoclassical equilibrium and growth theory may be seriously misleading. When dynamic feedback mechanisms and increasing returns are considered factor mobility, trade and growth itself may be disequilibrating and lead to divergences between regions and between countries. A model of growth based on the performance of economies related to the structural characteristics of production and the demand characteristics of the goods traded. The paper concludes that the Turkey's economic progress in the future, as it liberalises factor markets and trade, will depend largely on the performance of the tradeable goods sector and the extent to which it can shift resources in to activities with a high income elasticity of demand in world market.

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https://hdl.handle.net/11511/108330

Collections

Department of Economics, Article