DIVERGENT REGIONAL-DEVELOPMENT, FACTOR MOBILITY, AND NONTRADED GOODS

Using an endogenous growth model with learning-by-doing effects in the production of a traded good, we derive divergent regional-growth path s in a two-region-three-good setting. A nontraded-goods sector using a mobile as well as an immobile factor of production provides the possi bility of a steady-state equilibrium with a dispersed distribution of mobile workers. The paper investigates regional specialization, trade, and migration patterns in the steady-state equilibrium as well as in the transition process towards the steady-state. The long-run producti on and trade patterns of the regions are determined by history-depende nt processes.