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Economic Geography and the Role of Profits

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  • Picard, Pierre M
  • 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 profits 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3385.

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Date of creation: May 2002
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Handle: RePEc:cpr:ceprdp:3385

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Keywords: economic geography; imperfect competition; product differentiation;

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References

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  1. 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.
  2. Eitan BERGLAS & David PINES, 1997. "Transaction Costs in a Tiebout Setup," Annales d'Economie et de Statistique, ENSAE, issue 45, pages 183-197.
  3. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Agglomeration and trade revisited," CORE Discussion Papers 1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Munich Reprints in Economics 20408, University of Munich, Department of Economics.
  5. J. Peter Neary, 2000. "Of Hype and Hyperbolas - Introducing the new Economic Geography," Working Papers 200019, School Of Economics, University College Dublin.
  6. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9780521171960, October.
  7. Haufler, Andreas & Wooton, Ian, 1999. "Country size and tax competition for foreign direct investment," Journal of Public Economics, Elsevier, vol. 71(1), pages 121-139, January.
  8. Eaton, Jonathan & Eckstein, Zvi, 1997. "Cities and growth: Theory and evidence from France and Japan," Regional Science and Urban Economics, Elsevier, vol. 27(4-5), pages 443-474, August.
  9. 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.
  10. Richard Arnott & Alex Anas & Kenneth Small, 1997. "Urban Spatial Structure," Boston College Working Papers in Economics 388., Boston College Department of Economics.
  11. 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.
  12. 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.
  13. 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.
  14. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  15. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  16. J.V. Henderson, 1972. "The Sizes and Types of Cities," Working Papers 75, Queen's University, Department of Economics.
  17. 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.
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Citations

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Cited by:
  1. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 2003. "Agglomeration and economic geography," CORE Discussion Papers 2003016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Kurt Hafner, 2007. "Economic Development and Technology Diffusion," DEGIT Conference Papers c012_008, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Okubo, Toshihiro & Picard, Pierre M. & Thisse, Jacques-François, 2010. "The spatial selection of heterogeneous firms," Journal of International Economics, Elsevier, vol. 82(2), pages 230-237, November.
  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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