Trade Policies and the Spatial Distribution of Development: A Two-Sector Analysis

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Abstract
The purpose of this paper is to investigate how trade policies which do not have an explicit spatial objective can implicitly influence the spatial pattern of development in an economy. A version of the neoclassical two-sector model is developed to demonstrate how the introduction of tariffs on the output of one sector will generally alter the spatial distribution of economic activities in an economy. It is shown that the greater the degree to which projects in the relatively protected sector are location-specific, the greater are the spatial effects generated, as mobile factors in the economy gravitate towards that sector.