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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. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.
  2. Diego Puga, 2008. "Agglomeration and cross-border infrastructure," Working Papers 2008-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  3. Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens, 2013. "Spatial Frictions," IZA Discussion Papers 7175, Institute for the Study of Labor (IZA).
  4. 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).

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