ABSTRACT
So far, we have considered market mechanisms that are mutually beneficial to all regions. The theory of comparative advantage says that each region will maintain its role in the multiregional economy by specializing in those goods and services for which it has the lowest opportunity cost. Our simple model of interregional movements of capital and labor says that, in the long run, regional differences in wages will be eliminated by a process whereby productive inputs flow in the direction of those regions in which they are in short supply. The general picture is one of harmony and balance among the regions of the multiregional economy.
