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Abstract

We study Krugman's core–periphery (CP) model for most general cases of nonidentical regions and fully characterize instant and long-run equilibria. Assuming immobility of labor, we describe the behavior of equilibrium wages/real wages. Moreover, the relative wages/real wages of industrial workers can both increase and decrease with the population with which they are associated. Under the assumption of industrial labor mobility, possible patterns of economic evolution, as responses to trade freeness, are fully described. We show that in the case of noticeable agricultural asymmetry, all mobile labor inevitably accumulates in countries with larger agricultural populations.