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"Taste heterogeneity, labor mobility and economic geography" - A critical reconsideration and correction

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  • Stephan Russek

    (University of Passau)

Abstract

This article reconsiders the linear new economic geography model under heterogeneous agents developed by Tabuchi and Thisse (2002) by applying an analytical technique introduced by Ludema and Wooton (1999). Two problematic aspects are identified: first, the divergence pattern for countries which differ in amenities is incorrect. I show that the degree of agglomeration is highest when trade costs are high. Besides this minor problem, the second critical issue concerns the welfare analysis. It is shown in this paper that this model exhibits a latent tendency for overagglomeration when trade costs are high and underagglomeration when trade costs are low, bringing it in line with other welfare analyses of new economic geography models.

Suggested Citation

  • Stephan Russek, 2008. ""Taste heterogeneity, labor mobility and economic geography" - A critical reconsideration and correction," Economics Bulletin, AccessEcon, vol. 18(1), pages 1-13.
    • Handle: RePEc:ebl:ecbull:eb-07r00005
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    References listed on IDEAS

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    1. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Fabien Candau, 2013. "Trade, FDI and Migration," International Economic Journal, Taylor & Francis Journals, vol. 27(3), pages 441-461, September.
    2. Pfluger, Michael & Takatoshi Tabuchi, 2008. "Trade and Location with Land as a Productive Factor," CIRJE F-Series CIRJE-F-591, CIRJE, Faculty of Economics, University of Tokyo.

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    More about this item

    Keywords

    Agglomeration;

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • D6 - Microeconomics - - Welfare Economics

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