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Agglomeration And Regional Costs Of Living

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  • Jens Suedekum

Abstract

Standard models of the new economic geography predict that costs of living are lower in the core than in the periphery. But in reality they tend to be higher in agglomeration areas, mainly because of regional differences in housing costs. In this paper, we add a home goods sector to the seminal NEG model of Krugman (1991). We show that a core-periphery structure can endogenously emerge in which the core is the more expensive area. This result has an important normative implication. Since higher costs of living imply falling real wages if there is no nominal wage premium, it is not desirable for everybody to live in the core region. Copyright Blackwell Publishing, Inc. 2006

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Regional Science.

Volume (Year): 46 (2006)
Issue (Month): 3 ()
Pages: 529-543

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Handle: RePEc:bla:jregsc:v:46:y:2006:i:3:p:529-543

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-4146

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Cited by:
  1. Hajime Takatsuka & Dao-Zhi Zeng, 2013. "Industrial configuration in an economy with low transportation costs," The Annals of Regional Science, Springer, vol. 51(2), pages 593-620, October.
  2. Dusan Paredes, 2010. "Can NEG explains the spatial distribution of wages in developing countries? Evidence from Chile," Documentos de Trabajo en Economia y Ciencia Regional 02, Universidad Catolica del Norte, Chile, Department of Economics, revised Sep 2010.
  3. Zheng Wang & Changxin Liu & Kejing Mao, 2012. "Industry cluster: spatial density and optimal scale," The Annals of Regional Science, Springer, vol. 49(3), pages 719-731, December.
  4. Elena Lasarte Navamuel & Dusan Paredes & Esteban Fernández Vázquez, 2012. "A true cost of living index for Spain using a microeconomic approach and censored data," Documentos de Trabajo en Economia y Ciencia Regional 26, Universidad Catolica del Norte, Chile, Department of Economics, revised Aug 2012.
  5. Pflüger, Michael, 2008. "Die Neue Ökonomische Geographie: Ein Überblick," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-54-08, University of Passau, Faculty of Business and Economics.
  6. Uwe Blien & Hermann Gartner & Heiko Stüber & Katja Wolf, 2009. "Regional price levels and the agglomeration wage differential in western Germany," The Annals of Regional Science, Springer, vol. 43(1), pages 71-88, March.
  7. Blien, Uwe & Gartner, Hermann & Stüber, Heiko & Wolf, Katja, 2007. "Expensive and low-price places to live : regional price levels and the agglomeration wage differential in Western Germany," IAB Discussion Paper 200715, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Pflüger, Michael P. & Tabuchi, Takatoshi, 2008. "Trade and Location with Land as a Productive Factor," IZA Discussion Papers 3716, Institute for the Study of Labor (IZA).
  9. Juan Esteban Vélez Villegas, 2009. "Los procesos de aglomeración en Colombia a la luz de la nueva geografía económica," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  10. Cirer-Costa, Joan Carles, 2013. "The role of geography in the success of the balearic tourism industry," MPRA Paper 47701, University Library of Munich, Germany.
  11. Schaeffer, Y. & Charlot, S., 2012. "Inequality aversion, income redistribution and economic geography," Working Papers 201204, Grenoble Applied Economics Laboratory (GAEL).
  12. vom Berge, Philipp, 2011. "Search Unemployment and New Economic Geography," University of Regensburg Working Papers in Business, Economics and Management Information Systems 454, University of Regensburg, Department of Economics.

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