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Competition, market access and economic geography: Structural estimation and predictions for France

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  • Combes, Pierre-Philippe
  • Lafourcade, Miren

Abstract

This paper evaluates the role of competition and input–output market access in shaping the geography of economic activity. In a first step, we develop a multi-region multi-industry economic geography model under Cournot competition, of which we estimate the parameter values from French data. We then turn to simulations to see whether a core–periphery equilibrium exists, even with strategic interactions among firms. We show that the marginal profits and mark-ups of firms are greater in both core and peripheral regions than in between, due to a subtle interplay between competition and market-access forces. Production is mostly monocentric, however, and profits are higher in the core, which should produce further concentration. We finally show that policy-makers face a difficult trade-off: lowering inter-regional trade costs reduces disparities between regions, but increases intra-regional inequality.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 41 (2011)
Issue (Month): 6 ()
Pages: 508-524

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Handle: RePEc:eee:regeco:v:41:y:2011:i:6:p:508-524

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Web page: http://www.elsevier.com/locate/regec

Related research

Keywords: Regional development; Core–periphery; Trade costs; Transport costs;

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References

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Citations

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Cited by:
  1. Diego Puga, 2008. "Agglomeration and cross-border infrastructure," Working Papers 2008-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  2. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2011. "Spatial Frictions," CEP Discussion Papers dp1108, Centre for Economic Performance, LSE.
  3. Calfat, Germán & Flôres, R.G. & Rivas, Ana & Granato, M., 2010. "Policy making in asymmetric regional integrations: a methodology for allocating cohesion fund resources," IOB Working Papers 2010.05, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).
  4. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.

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