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Agglomeration under money illusion

Author

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  • Toshihiro Atsumi

    (Meiji Gakuin University)

Abstract

The core-periphery model by Krugman (1991) sparked the literature of new economic geography, which studies the mechanism of spatial agglomeration of economic activities. Forslid and Ottaviano (2003) offered an analytically solvable version of the core-periphery model. Based on their results, I comment on further implications of the model besides those covered in their paper and subsequent studies. Specifically, I show that agglomeration still occurs even under complete money illusion, but with two differences: 1) agglomeration becomes less likely, that is, other things being equal, agglomeration occurs less easily, and 2) the break and the sustain points coincide

Suggested Citation

  • Toshihiro Atsumi, 2017. "Agglomeration under money illusion," Economics Bulletin, AccessEcon, vol. 37(4), pages 2962-2969.
    • Handle: RePEc:ebl:ecbull:eb-17-00078
    as

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    References listed on IDEAS

    as
    1. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    2. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
    3. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
    4. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 857-880.
    5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    6. Elisenda Paluzie, 2001. "articles: Trade policy and regional inequalities," Papers in Regional Science, Springer;Regional Science Association International, vol. 80(1), pages 67-85.
    7. Baldwin, Richard E., 1999. "Agglomeration and endogenous capital," European Economic Review, Elsevier, vol. 43(2), pages 253-280, February.
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    More about this item

    Keywords

    agglomeration; economic geography; money illusion;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F2 - International Economics - - International Factor Movements and International Business

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