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.
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Article provided by Economics Bulletin in its journal Economics Bulletin.
Volume (Year): 18 (2008) Issue (Month): 1 () Pages: 1-13 Download reference. The following formats are available: HTML,
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Handle: RePEc:ebl:ecbull:v:18:y:2008:i:1:p:1-13
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Find related papers by JEL classification: R0 - Urban, Rural, and Regional Economics - - General D6 - Microeconomics - - Welfare Economics
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002.
"Agglomeration and Trade Revisited,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
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