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Economic geography and the role of profits

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  • PICARD, Pierre
  • THISSE, Jacques-François
  • TOULEMONDE, Eric

Abstract

In modern economies, the amount of profits distributed to shareholders is far from being negligible. We show that the way they are distributed among agents matters for the space-economy. For example, the existence of mobile rentiers is sufficient to make the symmetric configuration unstable for all transport cost values and to make partial agglomeration of firms stable. Obviously, to account for profits and for their distribution, the assumption of free entry must be abandoned. So doing, we ignore fixed costs and show that it is imperfect competition more than increasing returns that matters for the formation of agglomeration in economic geography..

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2002027.

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Date of creation: 00 Apr 2002
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Handle: RePEc:cor:louvco:2002027

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Keywords: economic geography; imperfect competition; product differentiation;

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References

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  1. Andreas Haufler & Ian Wooton, . "Country Size and Tax Competition for Foreign Direct Investment," Working Papers 9702, Business School - Economics, University of Glasgow.
  2. Victor Ginsburgh & André De Palma & Yorgo Papageorgiou & Jacques-François Thisse, 1985. "The principle of minimum differentiation holds under sufficient heterogeneity," ULB Institutional Repository 2013/1759, ULB -- Universite Libre de Bruxelles.
  3. 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.
  4. Jonathan Eaton & Zvi Eckstein, 1994. "Cities and Growth: Theory and Evidence from france and Japan," Boston University - Institute for Economic Development 36, Boston University, Institute for Economic Development.
  5. Richard Arnott & Alex Anas & Kenneth Small, 1997. "Urban Spatial Structure," Boston College Working Papers in Economics 388., Boston College Department of Economics.
  6. Eitan BERGLAS & David PINES, 1997. "Transaction Costs in a Tiebout Setup," Annales d'Economie et de Statistique, ENSAE, issue 45, pages 183-197.
  7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  8. Ginsburgh, Victor & Papageorgiou, Yorgo & Thisse, Jacques-Francois, 1985. "On existence and stability of spatial equilibria and steady-states," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 149-158, June.
  9. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-56, September.
  10. Fujita, M. & Thisse, J.-F., . "Economics of agglomeration," CORE Discussion Papers RP -1250, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  12. Xavier Vives, 1990. "Trade Association Disclosure Rules, Incentives to Share Information, and Welfare," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 409-430, Autumn.
  13. Fujita, Masahisa & Ogawa, Hideaki, 1982. "Multiple equilibria and structural transition of non-monocentric urban configurations," Regional Science and Urban Economics, Elsevier, vol. 12(2), pages 161-196, May.
  14. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
  15. Starrett, David, 1978. "Market allocations of location choice in a model with free mobility," Journal of Economic Theory, Elsevier, vol. 17(1), pages 21-37, February.
  16. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, December.
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Cited by:
  1. Okubo, Toshihiro & Picard, Pierre M & Thisse, Jacques-François, 2008. "The Spatial Selection of Heterogeneous Firms," CEPR Discussion Papers 6978, C.E.P.R. Discussion Papers.
  2. OTTAVIANO, Gianmarco & THISSE, Jacques-François, . "Agglomeration and economic geography," CORE Discussion Papers RP -1725, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Hafner, Kurt A., 2004. "Industrial Agglomeration and Economic Development," Center for European, Governance and Economic Development Research Discussion Papers 31, University of Goettingen, Department of Economics.
  4. Fabien Candau & Marc Fleurbaey, 2011. "Agglomeration and Welfare with Heterogeneous Preferences," Open Economies Review, Springer, vol. 22(4), pages 685-708, September.

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