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Marshallian theory of regional agglomeration

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  • Michael Beenstock
  • Daniel Felsenstein

Abstract

Most models of regional agglomeration are based on the new economic geography (NEG) model in which returns to scale are pecuniary. We investigate the implications for regional agglomeration of a 'Marshallian' model in which returns to scale derive from technological externalities. Workers are assumed to have heterogeneous 'home region' preferences. The model is designed to explain how 'second nature' determines regional wage inequality and the regional distribution of economic activity. We show that agglomeration is not a necessary outcome of Marshallian externalities. However, if centrifugal or positive externalities are sufficiently strong relative to their centripetal or negative counterparts, the model generates multiple agglomerating equilibria. These equilibria multiply if, in addition, there are scale economies in amenities. A dynamic version of the model is developed in which external economies and inter-regional labour mobility grow over time. Regional wage inequality overshoots its long run equilibrium and, there is more agglomeration in the long run. Copyright (c) 2009 the author(s). Journal compilation (c) 2009 RSAI.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Papers in Regional Science.

Volume (Year): 89 (2010)
Issue (Month): 1 (03)
Pages: 155-172

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Handle: RePEc:bla:presci:v:89:y:2010:i:1:p:155-172

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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1056-8190

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Cited by:
  1. Colin Wren & Jonathan Jones, 2012. "On the Relative Importance of Intermediate and Non-Intermediate Goods for FDI Location: A New Approach," ERSA conference papers ersa12p165, European Regional Science Association.
  2. 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.
  3. Jonathan Jones & Colin Wren, 2011. "On the Relative Importance of Agglomeration Economies in the Location of FDI Across British Regions," SERC Discussion Papers 0089, Spatial Economics Research Centre, LSE.

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