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A theory of rational spatial agglomerations

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  • Mossay, Pascal
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    Abstract

    We model the behavior of rational forward-looking agents in a spatial economy. The economic geography structure is built on Fujita et al. (1999)'s racetrack economy. Workers choose optimally what to consume at each period, as well as which spatial itinerary to follow in the geographical space. The spatial extent of the resulting agglomerations increases with the taste for variety and the expenditure share on manufactured goods, and decreases with transport costs. Because forward-looking agents anticipate the future formation of agglomerations, they are more responsive to spatial utility differentials than myopic agents. As a consequence, the emerging agglomerations are larger under perfect foresight spatial adjustments than under myopic ones.

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    Bibliographic Info

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

    Volume (Year): 43 (2013)
    Issue (Month): 2 ()
    Pages: 385-394

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    Handle: RePEc:eee:regeco:v:43:y:2013:i:2:p:385-394

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

    Related research

    Keywords: New economic geography; Agglomeration; Scale economies; Monopolistic competition; Spatial economy; Migration; Expectation;

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    References

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    1. Pierre Picard & Takatoshi Tabuchi, 2010. "Self-organized agglomerations and transport costs," Economic Theory, Springer, vol. 42(3), pages 565-589, March.
    2. Mossay, Pascal, 2006. "The core-periphery model: A note on the existence and uniqueness of short-run equilibrium," Journal of Urban Economics, Elsevier, vol. 59(3), pages 389-393, May.
    3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    4. Oyama, Daisuke, 2006. "History versus Expectations in Economic Geography Reconsidered," MPRA Paper 9287, University Library of Munich, Germany.
    5. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 21-49, February.
    6. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
    7. Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-91, October.
    8. Gianmarco Ottaviano, 1996. "Monopolistic Competition, Trade and Endogenous Spatial Fluctuations," Working Papers 240, Dipartimento Scienze Economiche, Universita' di Bologna.
    9. Mossay, Pascal, 2003. "Increasing returns and heterogeneity in a spatial economy," Regional Science and Urban Economics, Elsevier, vol. 33(4), pages 419-444, July.
    10. Fukao, Kyoji & Benabou, Roland, 1993. "History versus Expectations: A Comment," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 535-42, May.
    11. Oyama, Daisuke, 2006. "Agglomeration under Forward-Looking Expectations: Potentials and Global Stability," MPRA Paper 15239, University Library of Munich, Germany.
    12. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 617-50, May.
    13. Baldwin, Richard & Venables, Anthony J, 1994. "International Migration, Capital Mobility and Transitional Dynamics," Economica, London School of Economics and Political Science, vol. 61(243), pages 285-300, August.
    14. Mossay, Pascal, 2006. "Stability of spatial adjustments across local exchange economies," Regional Science and Urban Economics, Elsevier, vol. 36(4), pages 431-449, July.
    15. Sonnenschein, Hugo, 1982. "Price Dynamics Based on the Adjustment of Firms," American Economic Review, American Economic Association, vol. 72(5), pages 1088-96, December.
    16. Papageorgiou, Yorgo Y & Smith, Terrence R, 1983. "Agglomeration as Local Instability of Spatially Uniform Steady-States," Econometrica, Econometric Society, vol. 51(4), pages 1109-19, July.
    17. Pascal Mossay, 2003. "Increasing Returns And Heterogeneity In A Spatial Economy," Working Papers. Serie AD 2003-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    18. Frédéric Robert-Nicoud, 2005. "The structure of simple 'New Economic Geography' models (or, On identical twins)," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 201-234, April.
    19. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
    20. Sonnenschein, Hugo, 1981. "Price dynamics and the disappearance of short-run profits : An example," Journal of Mathematical Economics, Elsevier, vol. 8(2), pages 201-204, July.
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    Cited by:
    1. Camacho, Carmen, 2013. "Migration modelling in the New Economic Geography," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 233-244.
    2. Giorgio FABBRI, 2014. "Ecological Barriers and Convergence: a Note on Geometry in Spatial Growth Models," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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